CASE # |A G E N C Y | D i g e s t b y :

DIOLOSA v CA (1984)
Ponente: Relova
Petitioner: Mariano Diolosa abd Alegreia Villanueva-Diolosa
Respondent: CA and Quirino Baterna (owner and proprietor of Quin Baterna Realty)
Under what topic: Extinguishment of Agency; Revocation
Synopsis: An agreement was entered into between Baterna, a licensed real estate
broker, and spouses Diolosa, whereby the former was constituted as exclusive sales
agent of the spouses, its successors, heirs and assigns, to dispose of, sell, cede,
transfer and convey the lots included in VILLA ALEGRE SUBDIVISION owned by the
spouses, until all the subject property as subdivided is fully disposed of. Through
a letter, the spouses terminated the services of Baterna as their exclusive sales
agent for the reason that the lots remained unsold were for reservation for their
grandchildren.
Baterna filed this suit to recover the unpaid commission against the Diolosas over
some of the lots subject of the agency that were not sold. SC held that because of
the express provision in the agency contract above quoted, the Diolosas could not
terminate the agency at will without paying damages. Also, since not one of the
grounds under the Civil Code (re: rescissible contracts) is present, and that it was
not shown that Baterna violated any terms of the contract of agency, Diolosas could
not rescind the contract without paying damages.
Doctrine: A contract of agency, being a valid contract, is rescissible only on
grounds provided under Article 1381 and 1382 of the Civil Code.
Facts:
An agreement was entered into between Baterna, a licensed real estate broker, and
spouses Diolosa, whereby the former was constituted as exclusive sales agent of
the spouses, its successors, heirs and assigns, to dispose of, sell, cede, transfer and
convey the lots included in VILLA ALEGRE SUBDIVISION owned by the spouses,
until all the subject property as subdivided is fully disposed of.
Pursuant to said agreement, Baterna acted for and in behalf of the spouses as their
agent in the sale of the lots included in the VILLA ALEGRE SUBDIVISION.
Through a letter, the spouses terminated the services of Baterna as their exclusive
sales agent for the reason that the lots remained unsold were for reservation for
their grandchildren.
Baterna filed this suit to recover the unpaid commission against the Diolosas over
some of the lots subject of the agency that were not sold.
CFI dismissed the complaint. CA reversed holding that Diolosas could not terminate
the agency at will without paying damages because of the express provision in the
contract that until all the subject property as subdivided is fully disposed of. It

CASE # |A G E N C Y | D i g e s t b y :
noted that there were still 27 unsold lots but Diolosas had only 6 granchildren,
hence, not a legal reason to terminate the agency.
Issue: Whether the spouses Diolosa could terminate the agency agreement
without paying damages to Baterna. (NO)
Held-Ratio:
Under the contract, the authority to sell is not extinguished until all the lots have
been disposed of. When, therefore, the Diolosas revoked the contract with Baterna
in a letter, they become liable to the latter for damages for breach of contract.
And, it may be added that since the agency agreement is a valid contract, the same
may be rescinded only on grounds specified in Articles 1381 and 1382 of the Civil
Code, as follows:
ART. 1381.

The following contracts are rescissible:

(1)
Those which are entered in to by guardians whenever the wards whom they
represent suffer lesion by more than one-fourth of the value of the things which are
the object thereof;
(2)
Those agreed upon in representation of absentees, if the latter suffer the
lesion stated in the preceding number;
(3)
Those undertaken in fraud of creditors when the latter cannot in any other
name collect the claims due them;
(4)
Those which refer to things under litigation if they have been entered into by
the defendant without the knowledge and approval of the litigants or of competent
judicial authority;
(5)

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

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

Not one of the grounds mentioned above is present which may be the subject of an
action of rescission, much less can spouses Diolosa say that Baterna violated the
terms of their agreement-such as failure to deliver to them the proceeds of the
purchase price of the lots.
Dispositive: Petition dismissed.