G.R. No. L-41420 July 10, 1992 Dominguez, discovered that DRACOR had used Shinko Trading Co.
scovered that DRACOR had used Shinko Trading Co., Ltd. (Shinko for brevity) as
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.
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 this
arrangement, Shinko was able to collect a total of U.S. $77,264.67. 3
CMS claimed that this commission paid to Shinko was in violation of the agreement and that it
(CMS) is entitled to 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 tantamount to DRACOR receiving
double compensation for the services it rendered.
After this discovery, CMS sold and shipped logs valued at U.S. $739,321.13 or
P2,883,351.90, 4 directly to several firms in Japan without the aid or intervention of DRACOR.
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 firms. In its reply, CMS averred as a defense to the
counterclaim that DRACOR had retained the sum of P101,167.59 as part of its commission for the
sales made by CMS. 5 Thus, as its counterclaim to DRACOR's counterclaim, CMS demanded
DRACOR return the amount it unlawfully retained. DRACOR later filed an amended counterclaim,
alleging 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.
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 likewise dismissed, as it was shown that
DRACOR had waived its rights to the balance of its commission in a letter dated February 2, 1963
to Atty. Carlos Moran Sison, president of CMS. 8 From said decision, only CMS appealed to the
Court of Appeals.
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 could not have held that Sison is entitled to recover from
Dracor the amount collected by Shinko as commissions, plaintiff-appellant having failed to prove
by competent evidence its claims." 10
Moreover, the appellate court held:
There is reason to believe that Shinko Trading Co. Ltd., was paid by defendant-
appellee out of its own commission 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:
1
 . . . , 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
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 dealings with CMS.
With regard to CMS's arguments concerning whether or not Shinko received the commission in
question, We find the same unmeritorious.
To begin with, these arguments question the findings of fact made by the Court of Appeals, which
are final and conclusive and cannot be reviewed on appeal to the Supreme Court. 12
Moreover, while it is true that the evidence adduced establishes the fact that Shinko is DRACOR's
agent or liaison in 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.
The fact that Shinko received the commissions in question was not established by the testimony of
Atty. Teodoro R. Dominguez to the effect that Shinko's president and director told him that Shinko
received a commission of U.S. $1.00 for every 1,000 board feet of logs sold, since the same is
hearsay. Similarly, the letter of Mr. K. Shibata of Toyo Menka Kaisha, Ltd. 14 is also hearsay since
Mr. Shibata was not presented to testify on his letter.
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
R. Aguinaldo, 16 president of DRACOR, and the reply-letter dated January 9, 1964 17 by
DRACOR's counsel Atty. V. E. Del Rosario to CMS's demand letter dated September 25, 1963
can not be categorized as admissions that Shinko did receive the commissions in question.
The alleged admission made by Atty. Ciocon, to wit —
Furthermore, as per our records, our shipment of logs to Toyo Menka Kaisha,
Ltd., is only for a net volume of 67,747,732 board feet which should enable
Shinko to collect a commission of US $67,747.73 only
cannot be considered as such since the statement was made in the context of
questioning CMS's tally of logs delivered to various Japanese firms.
Similarly, the statement of Daniel R. Aguinaldo, to wit —
. . . 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
and that of Atty. V. E. Del Rosario,
. . . 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:
It is a rule that "a statement is not competent as an admission where it does not,
under a reasonable construction, appear to admit or acknowledge the fact which
is sought to be proved by it". An admission or declaration to be competent must
have been expressed in definite, certain and unequivocal language (Bank of the
Philippine Islands vs. Fidelity & Surety Co., 51 Phil. 57, 64). 18
CMS's contention that DRACOR had admitted by its silence the allegation that Shinko received
the commissions in question when it failed to respond to Atty. Carlos Moran Sison's letter dated
February 6, 1963, is not supported by the evidence. DRACOR did in fact reply to the letter of Atty.
Sison, through the letter dated March 5, 1963 of F.A. Novenario, 19 which stated:
This is to acknowledge receipt of your letter dated February 6, 1963, and
addressed to Mr. D. R. Aguinaldo, who is at present out of the country.
xxx xxx xxx
We have no record or knowledge of any such payment of commission made by
Toyo Menka to Shinko. If the payment was made by Toyo Menka to Shinko, as
stated in your letter, we knew nothing about it and had nothing to do with it.
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".
2
Moreover, even if it was shown that Shinko did in fact receive the commissions in question, CMS WHEREFORE, the decision appealed from is hereby MODIFIED as stated in the preceding
is not entitled thereto since these were apparently paid by the buyers to Shinko for arranging the paragraph. Costs de officio.
sale. This is therefore not part of the gross sales of CMS's logs.
SO ORDERED.
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.

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 entitled to collect damages from CMS, since
damages are generally not awarded to the agent for the revocation of the agency, and the case at
bar is not one falling under the exception mentioned, which is to evade the payment of the agent's
commission.

Regarding CMS's contention that the Court of Appeals erred in not finding that DRACOR had
committed acts of fraud and bad faith, We find the same unmeritorious. Like the contention
involving Shinko and the questioned commissions, the findings of the Court of Appeals on the
matter were based on its appreciation of the evidence, and these findings are binding on this
Court.

In fine, We affirm the ruling of the Court of Appeals that there is no evidence to support CMS's
contention that 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. 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 commission. Consequently,
DRACOR is hereby ordered to remit to CMS the amount of P101,536.77.

3
 G.R. No. 163720 December 16, 2004
GENEVIEVE LIM, petitioner, vs. FLORENCIO SABAN, respondents.
DECISION
TINGA, J.:
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
The late Eduardo Ybañez (Ybañez), 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 February 8, 1994. Under the Agency Agreement, Ybañez
authorized Saban to look for a buyer of the lot for Two Hundred Thousand Pesos (P200,000.00)
and to mark up the selling price to include the amounts needed for payment of taxes, transfer of
title and other expenses incident to the sale, as well as Saban’s commission for the sale. 3
Through Saban’s efforts, Ybañez and his wife were able to sell the lot to the petitioner Genevieve
Lim (Lim) and the spouses Benjamin and Lourdes Lim (the Spouses Lim) on March 10, 1994. The
price of the lot as indicated in the Deed of Absolute Sale is Two Hundred Thousand Pesos
(P200,000.00).4 It appears, however, that the vendees agreed to purchase the lot at the price of
Six Hundred Thousand Pesos (P600,000.00), inclusive of taxes and other incidental expenses of
the sale. After the sale, Lim remitted to Saban the amounts of One Hundred Thirteen 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 broker’s 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 (P236,743.00). These checks were Bank of the Philippine
Islands (BPI) Check No. 1112645 dated June 12, 1994 for P25,000.00; BPI Check No. 1112647
dated June 19, 1994 for P18,743.00; BPI Check No. 1112646 dated June 26, 1994
for P25,000.00; and Equitable PCI Bank Check No. 021491B dated June 20, 1994
for P168,000.00.
Subsequently, Ybañez sent a letter dated June 10, 1994 addressed to Lim. In the letter Ybañez
asked Lim to cancel all the checks issued by her in Saban’s favor and to "extend another partial
payment" for the lot in his (Ybañez’s) favor.6
After the four checks in his favor were dishonored upon presentment, Saban filed a Complaint for
collection of sum of money and damages against Ybañez 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.
In his Complaint, Saban alleged that Lim and the Spouses Lim agreed to purchase the lot
for P600,000.00, i.e., with a mark-up of Four Hundred Thousand Pesos (P400,000.00) from the
price set by Ybañez. Of the total purchase price of P600,000.00, P200,000.00 went to
Ybañez, P50,000.00 allegedly went to Lim’s 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 checks 8 in
favor of Saban for the remaining P236,743.00.9
Saban alleged that Ybañez told Lim that he (Saban) was not entitled to any commission for the
sale since he concealed the actual selling price of the lot from Ybañez and because he was not a
licensed real estate broker. Ybañez was able to convince Lim to cancel all four checks.
Saban further averred that Ybañez and Lim connived to deprive him of his sales commission by
withholding payment 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, Ybañez claimed that Saban was not entitled to any commission because he
concealed the actual selling price from him and because he was not a licensed real estate broker.
Lim, for her part, argued that she was not privy to the agreement between Ybañez and Saban,
and that she issued stop payment orders for the three checks because Ybañez requested her to
pay the purchase price directly to him, instead of coursing it through Saban. She also alleged that
she agreed with Ybañez that the purchase price of the lot was only P200,000.00.
Ybañez 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
On May 14, 1997, the RTC rendered its Decision11 dismissing Saban’s complaint, declaring the
four (4) checks issued by Lim as stale and non-negotiable, and absolving Lim from any liability
towards Saban.
Saban appealed the trial court’s Decision to the Court of Appeals.
On October 27, 2003, the appellate court promulgated its Decision12 reversing the trial court’s
ruling. It held that Saban was entitled to his commission amounting to P236,743.00.13
The Court of Appeals ruled that Ybañez’s revocation of his contract of agency with Saban was
invalid because the agency was coupled with an interest and Ybañez effected the revocation in
bad faith in order to deprive Saban of his commission and to keep the profits for himself.14
The appellate court found that Ybañez and Lim connived to deprive Saban of his commission. It
declared that Lim is liable to pay Saban the amount of the purchase price of the lot corresponding
to his commission because she issued the four checks knowing that the total amount thereof
corresponded to Saban’s commission for the sale, as the agent of Ybañez. The appellate court
further ruled that, in issuing the checks in payment of Saban’s 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 checks.15
Lim filed a Motion for Reconsideration of the appellate court’s Decision, but her Motion was denied
by the Court of Appeals in a Resolution dated May 6, 2004.16
Not satisfied with the decision of the Court of Appeals, Lim filed the present petition.
4
Lim argues that the appellate court ignored the fact that after paying her agent and remitting to
Saban the amounts due for taxes and transfer of title, she paid the balance of the purchase price
directly to Ybañez.17
She further contends that she is not liable for Ybañez’s 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 Ybañez 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 Ybañez 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 Ybañez, the P50,000.00 due to her broker,
the P113,257.00 earmarked for taxes and other expenses incidental to the sale and Saban’s
commission as broker for Ybañez. According to Saban, Lim assumed the obligation to pay him his
commission. He insists that Lim and Ybañez connived to unjustly deprive him of his commission
from the negotiation of the sale.21
The issues for the Court’s 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 court’s finding that the agency was not revoked since Ybañez
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 Ybañez’s agent when, through his (Saban’s) efforts, Ybañez 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 Ybañez which expressly states that Saban
would be entitled to any excess in the purchase price after deducting the P200,000.00 due to
Ybañez 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 seller’s 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 broker’s 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 seller’s withdrawal in bad faith of the brokers’ authority cannot
unjustly deprive the brokers of their commissions as the seller’s 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 Ybañez by finding a suitable buyer to preparing the Deed of Absolute Sale between
Ybañez 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 Ybañez’s
share of P200,000.00 and the taxes and other incidental expenses of the sale.
However, the Court does not agree with the appellate court’s pronouncement that Saban’s 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 agent’s 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
agent’s interest is confined to earning his agreed compensation, the agency is not one coupled
with an interest, since an agent’s interest in obtaining his compensation as such agent is an
ordinary incident of the agency relationship.26
Saban’s 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.
Saban’s right to receive compensation for negotiating as broker for Ybañez 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 Ybañez set the price of the lot at P200,000.00 and that
the P600,000.00—the price agreed upon by her and Saban—was more than the amount set by
Ybañez because it included the amount for payment of taxes and for Saban’s commission as
broker for Ybañez.
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 Ybañez, 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 Ybañez 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
5
Three Thousand Two Hundred Fifty Seven Pesos (P393,257.00). Ybañez, 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 Ybañez. Apparently, although the amount actually paid by Lim
was P393,257.00, Ybañez rounded off the amount to P400,000.00 and waived the difference.
Lim’s act of issuing the four checks amounting to P236,743.00 in Saban’s 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 Ybañez), 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 Ybañez and ultimately realizing that Saban’s
commission is even more than what Ybañez 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
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 Ybañez 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 Ybañez’s estate, if that
remedy is still available,32 in view of the trial court’s dismissal of Saban’s complaint as against
Ybañez, with Saban’s express consent, due to the latter’s 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
Ybañez 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
Ybañez’s 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 Ybañez, 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.

The appellate court therefore had sufficient basis for concluding that Ybañez 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.

6
 G.R. No. 205657
INTERNATIONAL EXCHANGE BANK NOW UNION BANK OF THE PHILIPPINES, Petitioner vs
SPOUSES JEROME AND QUINNIE BRIONES, AND JOHN DOE, Respondents
DECISION
LEONEN, J.:
Upon accepting an agency, the agent becomes bound to carry out the agency and shall be held
liable for the damages, which the principal may incur due to the agent's non-performance.1
This resolves the Petition for Review on Certiorar2 filed by International Exchange Bank (iBank),
now Union Bank of the Philippines, assailing the Court of Appeals' September 27, 2012
Decision3 and February 6, 2013 Resolution4 in CA-G.R. CV. No. 97453, which upheld the June 16,
2011 Decision5 of Branch 138, Makati City Regional Trial Court in Civil Case No. 04-557.
On July 2, 2003, spouses Jerome and Quinnie Briones (Spouses Briones) took out a loan of
₱3,789,216.00 from iBank to purchase a BMW Z4 Roadster.6 The monthly amortization for two (2)
years was ₱78,942.00.7
The Spouses Briones executed a promissory note with chattel mortgage that required them to
take out an insurance policy on the vehicle.8 The promissory note also gave iBank, as the
Spouses Briones' attomey-infact, irrevocable authority to file an insurance claim in case of loss or
damage to the vehicle.9 The insurance proceeds were to be made payable to iBank.10
On November 5, 2003, at about 10:50 p.m., the mortgaged BMW Z4 Roadster was camapped by
three (3) armed men in front of Metrobank Banlat Branch in Tandang Sora, Quezon City. 11 Jerome
Briones (Jerome) immediately reported the incident to the Philippine National Police Traffic
Management Group.12
The Spouses Briones declared the loss to iBank, which instructed them to continue paying the
next three (3) monthly installments "as a sign of good faith," a directive they complied with. 13
On March 26, 2004, or after the Spouses Briones finished paying the three (3)-month installment,
iBank sent them a letter demanding full payment of the lost vehicle.14
On April 30, 2004, the Spouses Briones submitted a notice of claim with their insurance company,
which denied the claim on June 29, 2004 due to the delayed reporting of the lost vehicle. 15
On May 14, 2004, iBank filed a complaint for replevin and/or sum of money against the Spouses
Briones and a person named John Doe.16 The Complaint alleged that the Spouses Briones
defaulted in paying the monthly amortizations of the mortgaged vehicle.17
After no settlement was arrived at during the Pre-trial Conference, the case was referred to
Mediation and Judicial Dispute Resolution.18 However, the parties still failed to agree on a
compromise settlement.19
After pre-trial and trial on the merits, the Regional Trial Court20 dismissed iBank's complaint. It
ruled that as the duly constituted attorney-in- fact of the Spouses Briones, iBank had the obligation
to facilitate the filing of the notice of claim and then to pursue the release of the insurance
proceeds.21
The Regional Trial Court also pointed out that as the Spouses Briones' agent, iBank prioritized its
interest over that of its principal when it failed to file the notice of claim with the insurance
company and demanded full payment from the spouses.22
The dispositive portion of the Regional Trial Court Decision read:
WHEREFORE, premises considered, judgment is hereby rendered dismissing this case as the
obligation of both parties to each other has already been considered extinguished by
compensation.
SO ORDERED.23 (Emphasis in the original)
The Regional Trial Court's Decision was appealed by iBank to the Court of Appeals, which
dismissed24 it on September 27, 2012.
The Court of Appeals ruled that the terms and stipulations of the promissory note with chattel
mortgage were clear.25 Sections 6 and 22 of the promissory note provided that the Spouses
Briones, as the mortgagors, would insure the vehicle against loss, damage, theft, and fire with the
insurance proceeds payable to iBank, as the mortgagee.26 Furthermore, in the event of loss or
damage, Spouses Briones irrevocably appointed iBank or its assigns as their attorney-in-fact with
full power to process the insurance claim.27
The Court of Appeals stated that as the Spouses Briones' agent, iBank was bound by its
acceptance to carry out the agency.28 However, instead of filing an insurance claim, iBank opted to
collect the balance of Spouses Briones' loan.29 By not looking after the interests of its principal, the
Court of Appeals ruled that iBank should be held liable for the damages suffered by Spouses
Briones.30
The Court of Appeals likewise upheld the Regional Trial Court's ruling that "the denial of the
insurance claim [for delayed filing] was a direct consequence of [the] bank's inaction in not filing
the insurance claim."31
The dispositive portion of the Court of Appeals Decision read:
WHEREFORE, the instant appeal is hereby DENIED. The assailed Decision dated June 16, 2011
of the Regional Trial Court, Branch 138, Makati City is AFFIRMED.
SO ORDERED.32 (Emphasis in the original)
On February 6, 2013, the Court of Appeals denied33 iBank's motion for
34
reconsideration, prompting iBank to appeal the denial to this Court.
7
Petitioner iBank claims that it is entitled to recover the mortgaged vehicle or, in the alternative, to
collect a sum of money from respondents because of the clear wording of the promissory note with
chattel mortgage executed by respondents.35 Petitioner also insists that it is entitled to the award
of damages.36
Petitioner maintains that the insurance coverage taken on the vehicle is "only an aleatory
alternative that [respondents] are entitled [to]" if their claim is granted by the insurance
company.37 Petitioner asserts that it was the duty of the respondents to file a claim with the
insurance company. Thus, they should not be allowed to pass on that responsibility to petitioner
and they should be held accountable for the loan taken out on the carnapped vehicle.38
Moreover, petitioner posits that respondent Jerome's direct dealing with the insurance company
was a revocation of the agency relationship between petitioner and respondents.39
Petitioner holds that respondents only shifted the blame after the insurance company denied
respondents' claim.40
On the other hand, respondents insist that when the mortgaged vehicle was carnapped, petitioner,
as the agent, should have asserted its right "to collect, demand and proceed against the
[insurance company.]"41
Respondents state that after they had informed petitioner of the loss of the mortgaged vehicle,
they continued to pay the monthly installment for three (3) months as compliance with petitioner's
request. Nonetheless, despite their good faith and the insurance policy taken out on the
carnapped vehicle, petitioner still demanded full payment from them.42
Finally, respondents maintain that petitioner failed to exercise the "degree of diligence required [of
it considering] the fiduciary nature of its relationship with its client[s]."43
The issues for this Court's resolution are as follows:
First, whether an agency relationship existed between the parties;
Second, whether the agency relationship was revoked or terminated; and
Finally, whether petitioner is entitled to the return of the mortgaged vehicle or, in the alternative,
payment of the outstanding balance of the loan taken out for the mortgaged vehicle.
I reverse the findings of the Regional Trial Court and the Court of Appeals. They both found the
The Petition is devoid of merit.
In a contract of agency, "a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter."44 Furthermore,
Article 1884 of the Civil Code provides that "the agent is bound by his acceptance to carry out the
agency, and is liable for the damages which, through his non-performance, the principal may
suffer."45
Rallos v. Felix Go Chan & Sons Realty Corporation46 lays down the elements of agency:
Out of the above given principles, sprung the creation an acceptance of the relationship of
agency whereby one party, called the principal (mandante), authorizes another, called the
agent (mandatario), to act for and in his behalf in transactions with third persons. The essential
elements of agency are: (1) there is consent, express or implied, of the parties to establish the
relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the
agent acts as a representative and not for himself; and (4) the agent acts within the scope of his
authority.47 (Emphasis in the original, citation omitted)
All the elements of agency exist in this case. Under the promissory note with chattel mortgage,
Spouses Briones appointed iBank as their attorney-in-fact, authorizing it to file a claim with the
insurance company if the mortgaged vehicle was lost or damaged.48 Petitioner was also
authorized to collect the insurance proceeds as the beneficiary of the insurance policy.49 Sections
6 and 22 of the promissory note state:
6. The MORTGAGOR agrees that he will cause the mortgaged property/ies to be insured against
loss or damage by accident, theft and fire . . . with an insurance company/ies acceptable to the
MORTGAGEE ... ; that he will make all loss, if any, under such policy/ies payable to the
MORTGAGEE or its assigns ... [w]ith the proceeds thereon in case of loss, payable to the said
MORTGAGEE or its assigns ... shall be added to the principal indebtedness hereby secured
... [M]ortgagor hereby further constitutes the MORTGAGEE to be its/his/her Attorney-in-Fact for
the purpose of filing claims with insurance company including but not limited to apply, sign, follow-
up and secure any documents, deeds . . . that may be required by the insurance company to
process the insurance claim ...
22. In case of loss or damage, the MORTGAGOR hereby irrevocably appoints the MORTGAGEE
or its assigns as his attorney-in-fact with full power and authority to file, follow-up, prosecute,
compromise or settle insurance claims; to sign, execute and deliver the corresponding papers,
receipt and documents to the insurance company as may be necessary to prove the claim, and to
collect from the latter the proceeds of insurance to the extent of its interest. 50 (Emphasis supplied,
citation omitted)
Article 1370 of the Civil Code is categorical that when "the terms of a contract are clear and leave
no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall
control."51
The determination of agency is ultimately factual in nature and this Court sees no reason to
existence of an agency relationship between the Spouses Briones and iBank, based on the clear
wording of Sections 6 and 22 of the promissory note with chattel mortgage, which petitioner
prepared and respondents signed.
II
Petitioner asserts that the Spouses Briones effectively revoked the agency granted under the
promissory note when they filed a claim with the insurance company.52
Petitioner is mistaken.
8
Revocation as a form of extinguishing an agency under Article 1924 53 of the Civil Code only
applies in cases of incompatibility, such as when the principal disregards or bypasses the agent in
order to deal with a third person in a way that excludes the agent.54
In the case at bar, the mortgaged vehicle was camapped on November 5, 2003 and the Spouses
Briones immediately informed petitioner about the loss.55 The Spouses Briones continued paying
the monthly installment for the next three (3) months following the vehicle's loss to show their good
faith.56
However, on March 26, 2004, petitioner demanded full payment from Spouses Briones for the lost
vehicle.57 The Spouses Briones were thus constrained to file a claim for loss with the insurance
company on April 30, 2004, precisely because petitioner failed to do so despite being their agent
and being authorized to file a claim under the insurance policy.58 Not surprisingly, the insurance
company declined the claim for belated filing.
The Spouses Briones' claim for loss cannot be seen as an implied revocation of the agency or
their way of excluding petitioner. They did not disregard or bypass petitioner when they made an
insurance claim; rather, they had no choice but to personally do it because of their agent's
negligence. This is not the implied termination or revocation of an agency provided for under
Article 1924 of the Civil Code.
While a contract of agency is generally revocable at will as it is primarily based on trust and
confidence,59 Article 1927 of the Civil Code provides the instances when an agency becomes
irrevocable:
The petitioner is again mistaken.
As the agent, petitioner was mandated to look after the interests of the Spouses Briones.
However, instead of going after the insurance proceeds, as expected of it as the agent, petitioner
opted to claim the full amount from the Spouses Briones, disregard the established principal-
agency relationship, and put its own interests before those of its principal.
The facts show that the insurance policy was valid when the vehicle was lost, and that the
insurance claim was only denied because of the belated filing.1âwphi1
Having been negligent in its duties as the duly constituted agent, petitioner must be held liable for
the damages suffered by the Spouses Briones because of non-performance65 of its obligation as
the agent, and because it prioritized its interests over that of its principal.66
Furthermore, petitioner's bad faith was evident when it advised the Spouses Briones to continue
paying three (3) monthly installments after the loss, purportedly to show their good faith. 67 A
principal and an agent enjoy a fiduciary relationship marked with trust and confidence, therefore,
the agent has the duty "to act in good faith [to advance] the interests of [its] principal."68
If petitioner was indeed acting in good faith, it could have timely informed the Spouses Briones
that it was terminating the agency and its right to file an insurance claim, and could have advised
them to facilitate the insurance proceeds themselves. Petitioner's failure to do so only compounds
its negligence and underscores its bad faith. Thus, it will be inequitable now to compel the
Spouses Briones to pay the full amount of the lost property.

Article 1927. An agency cannot be revoked if a bilateral contract depends upon it, or if it is the WHEREFORE, premises considered, the Petition is DENIED. The Court of Appeals Decision and
means of fulfilling an obligation already contracted, or if a partner is appointed manager of a Resolution dated September 27, 2012 and February 6, 2013, respectively, in CA-G.R. CV. No.
partnership in the contract of partnership and his removal from the management is unjustifiable. 97453 are AFFIRMED.

A bilateral contract that depends upon the agency is considered an agency coupled with an SO ORDERED.
interest, making it an exception to the general rule of revocability at will. 60 Lim v.
Saban61 emphasizes that when an agency is established for both the principal and the agent, an
agency coupled with an interest is created and the principal cannot revoke the agency at will. 62

In the promissory note with chattel mortgage, the Spouses Briones authorized petitioner to claim,
collect, and apply· the insurance proceeds towards the full satisfaction of their loan if the
mortgaged vehicle were lost or damaged. Clearly, a bilateral contract existed between the parties,
making the agency irrevocable. Petitioner was also aware of the bilateral contract; thus, it included
the designation of an irrevocable agency in the promissory note with chattel mortgage that it
prepared for the Spouses Briones to sign.

III
Petitioner asserts that the insurance coverage is only an alternative available to the Spouses
Briones;63 and with the denial of the insurance claim, the Spouses Briones are obligated to pay the
remaining balance plus interest of the mortgaged vehicle.64

9
 G.R. No. L-41182-3 April 16, 1988
DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants, vs.
THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO S.CANILAO, and
SEGUNDINA NOGUERA, respondents-appellees
SARMIENTO , J.:
The petitioners invoke the provisions on human relations of the Civil Code in this appeal by
certiorari. The facts are beyond dispute:
xxx xxx xxx
On the strength of a contract (Exhibit A for the appellant Exhibit 2 for the
appellees) entered into on Oct. 19, 1960 by and between Mrs. Segundina
Noguera, party of the first part; the Tourist World Service, Inc., represented by
Mr. Eliseo Canilao as party of the second part, and hereinafter referred to as
appellants, the Tourist World Service, Inc. leased the premises belonging to the
party of the first part at Mabini St., Manila for the former-s use as a branch office.
In the said contract the party of the third part held herself solidarily liable with the
party of the part for the prompt payment of the monthly rental agreed on. When
the branch office was opened, the same was run by the herein appellant Una 0.
Sevilla payable to Tourist World Service Inc. by any airline for any fare brought in
on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3% was to be
withheld by the Tourist World Service, Inc.
On or about November 24, 1961 (Exhibit 16) the Tourist World Service, Inc.
appears to have been informed that Lina Sevilla was connected with a rival firm,
the Philippine Travel Bureau, and, since the branch office was anyhow losing, the
Tourist World Service considered closing down its office. This was firmed up by
two resolutions of the board of directors of Tourist World Service, Inc. dated Dec.
2, 1961 (Exhibits 12 and 13), the first abolishing the office of the manager and
vice-president of the Tourist World Service, Inc., Ermita Branch, and the
second,authorizing the corporate secretary to receive the properties of the
Tourist World Service then located at the said branch office. It further appears
that on Jan. 3, 1962, the contract with the appellees for the use of the Branch
Office premises was terminated and while the effectivity thereof was Jan. 31,
1962, the appellees no longer used it. As a matter of fact appellants used it since
Nov. 1961. Because of this, and to comply with the mandate of the Tourist World
Service, the corporate secretary Gabino Canilao went over to the branch office,
and, finding the premises locked, and, being unable to contact Lina Sevilla, he
padlocked the premises on June 4, 1962 to protect the interests of the Tourist
World Service. When neither the appellant Lina Sevilla nor any of her employees
could enter the locked premises, a complaint wall filed by the herein appellants
against the appellees with a prayer for the issuance of mandatory preliminary
injunction. Both appellees answered with counterclaims. For apparent lack of
interest of the parties therein, the trial court ordered the dismissal of the case
without prejudice.
The appellee Segundina Noguera sought reconsideration of the order dismissing
her counterclaim which the court a quo, in an order dated June 8, 1963, granted
permitting her to present evidence in support of her counterclaim.
On June 17,1963, appellant Lina Sevilla refiled her case against the herein
appellees and after the issues were joined, the reinstated counterclaim of
Segundina Noguera and the new complaint of appellant Lina Sevilla were jointly
heard following which the court a quo ordered both cases dismiss for lack of
merit, on the basis of which was elevated the instant appeal on the following
assignment of errors:
I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE NATURE OF
PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA'S COMPLAINT.
II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS. LINA
0. SEVILA'S ARRANGEMENT (WITH APPELLEE TOURIST WORLD SERVICE,
INC.) WAS ONE MERELY OF EMPLOYER-EMPLOYEE RELATION AND IN
FAILING TO HOLD THAT THE SAID ARRANGEMENT WAS ONE OF JOINT
BUSINESS VENTURE.
III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLANT
MRS. LINA O. SEVILLA IS ESTOPPED FROM DENYING THAT SHE WAS A
MERE EMPLOYEE OF DEFENDANT-APPELLEE TOURIST WORLD SERVICE,
INC. EVEN AS AGAINST THE LATTER.
IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES HAD
NO RIGHT TO EVICT APPELLANT MRS. LINA O. SEVILLA FROM THE A.
MABINI OFFICE BY TAKING THE LAW INTO THEIR OWN HANDS.
V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL APPELLEE
NOGUERA'S RESPONSIBILITY FOR APPELLANT LINA O. SEVILLA'S
FORCIBLE DISPOSSESSION OF THE A. MABINI PREMISES.
VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT APPELLANT
MRS. LINA O. SEVILLA SIGNED MERELY AS GUARANTOR FOR RENTALS.
On the foregoing facts and in the light of the errors asigned the issues to be resolved are:
1. Whether the appellee Tourist World Service unilaterally disco the telephone
line at the branch office on Ermita;
2. Whether or not the padlocking of the office by the Tourist World Service was
actionable or not; and
3. Whether or not the lessee to the office premises belonging to the appellee
Noguera was appellees TWS or TWS and the appellant.
In this appeal, appealant Lina Sevilla claims that a joint bussiness venture was
entered into by and between her and appellee TWS with offices at the Ermita
branch office and that she was not an employee of the TWS to the end that her
relationship with TWS was one of a joint business venture appellant made
declarations showing:
10
1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and wife of
an eminent eye, ear and nose specialist as well as a imediately
columnist had been in the travel business prior to the
establishment of the joint business venture with appellee Tourist
World Service, Inc. and appellee Eliseo Canilao, her compadre,
she being the godmother of one of his children, with her own
clientele, coming mostly from her own social circle (pp. 3-6 tsn.
February 16,1965).
2. Appellant Mrs. Sevilla was signatory to a lease agreement
dated 19 October 1960 (Exh. 'A') covering the premises at A.
Mabini St., she expressly warranting and holding [sic] herself
'solidarily' liable with appellee Tourist World Service, Inc. for the
prompt payment of the monthly rentals thereof to other appellee
Mrs. Noguera (pp. 14-15, tsn. Jan. 18,1964).
3. Appellant Mrs. Sevilla did not receive any salary from
appellee Tourist World Service, Inc., which had its own,
separate office located at the Trade & Commerce Building; nor
was she an employee thereof, having no participation in nor
connection with said business at the Trade & Commerce
Building (pp. 16-18 tsn Id.).
4. Appellant Mrs. Sevilla earned commissions for her own
passengers, her own bookings her own business (and not for
any of the business of appellee Tourist World Service, Inc.)
obtained from the airline companies. She shared the 7%
commissions given by the airline companies giving appellee
Tourist World Service, Lic. 3% thereof aid retaining 4% for
herself (pp. 18 tsn. Id.)
5. Appellant Mrs. Sevilla likewise shared in the expenses of
maintaining the A. Mabini St. office, paying for the salary of an
office secretary, Miss Obieta, and other sundry expenses, aside
from desicion the office furniture and supplying some of fice
furnishings (pp. 15,18 tsn. April 6,1965), appellee Tourist World
Service, Inc. shouldering the rental and other expenses in
consideration for the 3% split in the co procured by appellant
Mrs. Sevilla (p. 35 tsn Feb. 16,1965).
6. It was the understanding between them that appellant Mrs.
Sevilla would be given the title of branch manager for
appearance's sake only (p. 31 tsn. Id.), appellee Eliseo Canilao
admit that it was just a title for dignity (p. 36 tsn. June 18, 1965-
testimony of appellee Eliseo Canilao pp. 38-39 tsn April 61965-
testimony of corporate secretary Gabino Canilao (pp- 2-5,
Appellants' Reply Brief)
Upon the other hand, appellee TWS contend that the appellant was an employee
of the appellee Tourist World Service, Inc. and as such was designated
manager.1
xxx xxx xxx
The trial court2 held for the private respondent on the premise that the private respondent, Tourist
World Service, Inc., being the true lessee, it was within its prerogative to terminate the lease and
padlock the premises. 3 It likewise found the petitioner, Lina Sevilla, to be a mere employee of said
Tourist World Service, Inc. and as such, she was bound by the acts of her employer. 4 The
respondent Court of Appeal 5 rendered an affirmance.
The petitioners now claim that the respondent Court, in sustaining the lower court, erred.
Specifically, they state:
I
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS
DISCRETION IN HOLDING THAT "THE PADLOCKING OF THE PREMISES BY TOURIST
WORLD SERVICE INC. WITHOUT THE KNOWLEDGE AND CONSENT OF THE APPELLANT
LINA SEVILLA ... WITHOUT NOTIFYING MRS. LINA O. SEVILLA OR ANY OF HER
EMPLOYEES AND WITHOUT INFORMING COUNSEL FOR THE APPELLANT (SEVILIA), WHO
IMMEDIATELY BEFORE THE PADLOCKING INCIDENT, WAS IN CONFERENCE WITH THE
CORPORATE SECRETARY OF TOURIST WORLD SERVICE (ADMITTEDLY THE PERSON
WHO PADLOCKED THE SAID OFFICE), IN THEIR ATTEMP AMICABLY SETTLE THE
CONTROVERSY BETWEEN THE APPELLANT (SEVILLA) AND THE TOURIST WORLD
SERVICE ... (DID NOT) ENTITLE THE LATTER TO THE RELIEF OF DAMAGES" (ANNEX "A"
PP. 7,8 AND ANNEX "B" P. 2) DECISION AGAINST DUE PROCESS WHICH ADHERES TO THE
RULE OF LAW.
II
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS
DISCRETION IN DENYING APPELLANT SEVILLA RELIEF BECAUSE SHE HAD "OFFERED TO
WITHDRAW HER COMP PROVIDED THAT ALL CLAIMS AND COUNTERCLAIMS LODGED BY
BOTH APPELLEES WERE WITHDRAWN." (ANNEX "A" P. 8)
III
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS
DISCRETION IN DENYING-IN FACT NOT PASSING AND RESOLVING-APPELLANT SEVILLAS
CAUSE OF ACTION FOUNDED ON ARTICLES 19, 20 AND 21 OF THE CIVIL CODE ON
RELATIONS.
IV
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS
DISCRETION IN DENYING APPEAL APPELLANT SEVILLA RELIEF YET NOT RESOLVING
HER CLAIM THAT SHE WAS IN JOINT VENTURE WITH TOURIST WORLD SERVICE INC. OR
AT LEAST ITS AGENT COUPLED WITH AN INTEREST WHICH COULD NOT BE TERMINATED
OR REVOKED UNILATERALLY BY TOURIST WORLD SERVICE INC.6
As a preliminary inquiry, the Court is asked to declare the true nature of the relation between Lina
Sevilla and Tourist World Service, Inc. The respondent Court of see fit to rule on the question, the
crucial issue, in its opinion being "whether or not the padlocking of the premises by the Tourist
11
World Service, Inc. without the knowledge and consent of the appellant Lina Sevilla entitled the
latter to the relief of damages prayed for and whether or not the evidence for the said appellant
supports the contention that the appellee Tourist World Service, Inc. unilaterally and without the
consent of the appellant disconnected the telephone lines of the Ermita branch office of the
appellee Tourist World Service, Inc.7 Tourist World Service, Inc., insists, on the other hand, that
Lina SEVILLA was a mere employee, being "branch manager" of its Ermita "branch" office and
that inferentially, she had no say on the lease executed with the private respondent, Segundina
Noguera. The petitioners contend, however, that relation between the between parties was one of
joint venture, but concede that "whatever might have been the true relationship between Sevilla
and Tourist World Service," the Rule of Law enjoined Tourist World Service and Canilao from
taking the law into their own hands, 8 in reference to the padlocking now questioned.
The Court finds the resolution of the issue material, for if, as the private respondent, Tourist World
Service, Inc., maintains, that the relation between the parties was in the character of employer and
employee, the courts would have been without jurisdiction to try the case, labor disputes being the
exclusive domain of the Court of Industrial Relations, later, the Bureau Of Labor Relations,
pursuant to statutes then in force. 9
In this jurisdiction, there has been no uniform test to determine the evidence of an employer-
employee relation. In general, we have relied on the so-called right of control test, "where the
person for whom the services are performed reserves a right to control not only the end to be
achieved but also the means to be used in reaching such end." 10 Subsequently, however, we
have considered, in addition to the standard of right-of control, the existing economic conditions
prevailing between the parties, like the inclusion of the employee in the payrolls, in determining the
existence of an employer-employee relationship.11
The records will show that the petitioner, Lina Sevilla, was not subject to control by the private
respondent Tourist World Service, Inc., either as to the result of the enterprise or as to the means
used in connection therewith. In the first place, under the contract of lease covering the Tourist
Worlds Ermita office, she had bound herself in solidum as and for rental payments, an
arrangement that would be like claims of a master-servant relationship. True the respondent Court
would later minimize her participation in the lease as one of mere guaranty, 12 that does not make
her an employee of Tourist World, since in any case, a true employee cannot be made to part with
his own money in pursuance of his employer's business, or otherwise, assume any liability thereof.
In that event, the parties must be bound by some other relation, but certainly not employment.
In the second place, and as found by the Appellate Court, '[w]hen the branch office was opened,
the same was run by the herein appellant Lina O. Sevilla payable to Tourist World Service, Inc. by
any airline for any fare brought in on the effort of Mrs. Lina Sevilla. 13 Under these circumstances,
it cannot be said that Sevilla was under the control of Tourist World Service, Inc. "as to the means
used." Sevilla in pursuing the business, obviously relied on her own gifts and capabilities.
It is further admitted that Sevilla was not in the company's payroll. For her efforts, she retained 4%
in commissions from airline bookings, the remaining 3% going to Tourist World. Unlike an
employee then, who earns a fixed salary usually, she earned compensation in fluctuating amounts
depending on her booking successes.
The fact that Sevilla had been designated 'branch manager" does not make her, ergo, Tourist
World's employee. As we said, employment is determined by the right-of-control test and certain
economic parameters. But titles are weak indicators.
In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a consequence,
accepting Lina Sevilla's own, that is, that the parties had embarked on a joint venture or otherwise,
a partnership. And apparently, Sevilla herself did not recognize the existence of such a relation. In
her letter of November 28, 1961, she expressly 'concedes your [Tourist World Service, Inc.'s] right
to stop the operation of your branch office 14 in effect, accepting Tourist World Service, Inc.'s
control over the manner in which the business was run. A joint venture, including a partnership,
presupposes generally a of standing between the joint co-venturers or partners, in which each
party has an equal proprietary interest in the capital or property contributed 15 and where each
party exercises equal rights in the conduct of the business.16 furthermore, the parties did not hold
themselves out as partners, and the building itself was embellished with the electric sign "Tourist
World Service, Inc. 17in lieu of a distinct partnership name.
It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man the
private respondent, Tourist World Service, Inc.'s Ermita office, she must have done so pursuant to
a contract of agency. It is the essence of this contract that the agent renders services "in
representation or on behalf of another.18 In the case at bar, Sevilla solicited airline fares, but she
did so for and on behalf of her principal, Tourist World Service, Inc. As compensation, she
received 4% of the proceeds in the concept of commissions. And as we said, Sevilla herself based
on her letter of November 28, 1961, pre-assumed her principal's authority as owner of the
business undertaking. We are convinced, considering the circumstances and from the respondent
Court's recital of facts, that the ties had contemplated a principal agent relationship, rather than a
joint managament or a partnership..
But unlike simple grants of a power of attorney, the agency that we hereby declare to be
compatible with the intent of the parties, cannot be revoked at will. The reason is that it is one
coupled with an interest, the agency having been created for mutual interest, of the agent and the
principal. 19 It appears that Lina Sevilla is a bona fide travel agent herself, and as such, she had
acquired an interest in the business entrusted to her. Moreover, she had assumed a personal
obligation for the operation thereof, holding herself solidarily liable for the payment of rentals. She
continued the business, using her own name, after Tourist World had stopped further operations.
Her interest, obviously, is not to the commissions she earned as a result of her business
transactions, but one that extends to the very subject matter of the power of management
delegated to her. It is an agency that, as we said, cannot be revoked at the pleasure of the
principal. Accordingly, the revocation complained of should entitle the petitioner, Lina Sevilla, to
damages.
As we have stated, the respondent Court avoided this issue, confining itself to the telephone
disconnection and padlocking incidents. Anent the disconnection issue, it is the holding of the
Court of Appeals that there is 'no evidence showing that the Tourist World Service, Inc.
disconnected the telephone lines at the branch office. 20 Yet, what cannot be denied is the fact that
Tourist World Service, Inc. did not take pains to have them reconnected. Assuming, therefore, that
it had no hand in the disconnection now complained of, it had clearly condoned it, and as owner of
the telephone lines, it must shoulder responsibility therefor.
12
The Court of Appeals must likewise be held to be in error with respect to the padlocking incident. ART. 2219. Moral damages25 may be recovered in the following and analogous
For the fact that Tourist World Service, Inc. was the lessee named in the lease con-tract did not cases:
accord it any authority to terminate that contract without notice to its actual occupant, and to
padlock the premises in such fashion. As this Court has ruled, the petitioner, Lina Sevilla, had xxx xxx xxx
acquired a personal stake in the business itself, and necessarily, in the equipment pertaining
thereto. Furthermore, Sevilla was not a stranger to that contract having been explicitly named
(10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34, and 35.
therein as a third party in charge of rental payments (solidarily with Tourist World, Inc.). She could
not be ousted from possession as summarily as one would eject an interloper.
The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby ordered to respond for the
same damages in a solidary capacity.
The Court is satisfied that from the chronicle of events, there was indeed some malevolent design
to put the petitioner, Lina Sevilla, in a bad light following disclosures that she had worked for a
rival firm. To be sure, the respondent court speaks of alleged business losses to justify the Insofar, however, as the private respondent, Segundina Noguera is concerned, no evidence has
closure '21 but there is no clear showing that Tourist World Ermita Branch had in fact sustained been shown that she had connived with Tourist World Service, Inc. in the disconnection and
such reverses, let alone, the fact that Sevilla had moonlit for another company. What the evidence padlocking incidents. She cannot therefore be held liable as a cotortfeasor.
discloses, on the other hand, is that following such an information (that Sevilla was working for
another company), Tourist World's board of directors adopted two resolutions abolishing the office The Court considers the sums of P25,000.00 as and for moral damages,24 P10,000.00 as
of 'manager" and authorizing the corporate secretary, the respondent Eliseo Canilao, to effect the exemplary damages, 25 and P5,000.00 as nominal 26 and/or temperate27 damages, to be just, fair,
takeover of its branch office properties. On January 3, 1962, the private respondents ended the and reasonable under the circumstances.
lease over the branch office premises, incidentally, without notice to her.
WHEREFORE, the Decision promulgated on January 23, 1975 as well as the Resolution issued
It was only on June 4, 1962, and after office hours significantly, that the Ermita office was on July 31, 1975, by the respondent Court of Appeals is hereby REVERSED and SET ASIDE. The
padlocked, personally by the respondent Canilao, on the pretext that it was necessary to Protect private respondent, Tourist World Service, Inc., and Eliseo Canilao, are ORDERED jointly and
the interests of the Tourist World Service. " 22 It is strange indeed that Tourist World Service, Inc. severally to indemnify the petitioner, Lina Sevilla, the sum of 25,00.00 as and for moral damages,
did not find such a need when it cancelled the lease five months earlier. While Tourist World the sum of P10,000.00, as and for exemplary damages, and the sum of P5,000.00, as and for
Service, Inc. would not pretend that it sought to locate Sevilla to inform her of the closure, but nominal and/or temperate damages.
surely, it was aware that after office hours, she could not have been anywhere near the premises.
Capping these series of "offensives," it cut the office's telephone lines, paralyzing completely its Costs against said private respondents.
business operations, and in the process, depriving Sevilla articipation therein.
SO ORDERED.
This conduct on the part of Tourist World Service, Inc. betrays a sinister effort to punish Sevillsa it
had perceived to be disloyalty on her part. It is offensive, in any event, to elementary norms of
justice and fair play.

We rule therefore, that for its unwarranted revocation of the contract of agency, the private
respondent, Tourist World Service, Inc., should be sentenced to pay damages. Under the Civil
Code, moral damages may be awarded for "breaches of contract where the defendant acted ... in
bad faith. 23

We likewise condemn Tourist World Service, Inc. to pay further damages for the moral injury done
to Lina Sevilla from its brazen conduct subsequent to the cancellation of the power of attorney
granted to her on the authority of Article 21 of the Civil Code, in relation to Article 2219 (10)
thereof —

ART. 21. Any person who wilfully causes loss or injury to another in a manner
that is contrary to morals, good customs or public policy shall compensate the
latter for the damage.24

13
 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.
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
14
 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 In any event the principal's power to revoke an agency at will is so pervasive, that
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
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:
the Supreme Court has consistently held that termination may be effected even if
the principal acts in bad faith, subject only to the principal's liability for damages
(Danon v. Antonio A. Brimo & Co., 42 Phil. 133; Reyes v. Mosqueda, 53 O.G.
2158 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
15
 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.
We agree with the court a quo that the principal cause of the termination of Valenzuela as General
Agent of 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:
16
 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
— The respondent appellate court also seriously erred in according undue reliance to the report of
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."
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
17
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
18
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.

19
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
PUNO, J.:
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 M. Calimlim, Ciriaco Reyes and Maj. David Diciano before
the Regional Trial Court (RTC) of Quezon City.1
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 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 a land in Bigte,
Norzagaray, Bulacan. Petitioner Diciano signed the MOA as a witness.2 It was further alleged that
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.
On February 15, 2000, Legaspi executed a special power of attorney (SPA) appointing his
nephew, private respondent Gutierrez, as his attorney-in-fact. Gutierrez was given the power to
deal with the treasure hunting activities on Legaspi’s land and to file charges against those who
may enter it without the latter’s authority.3 Legaspi agreed to give Gutierrez 40% of the treasure
that may be found in the land.
On February 29, 2000, Gutierrez filed a case for damages and injunction against petitioners for
illegally entering Legaspi’s 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 Legaspi’s 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 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.
The case5 was subsequently raffled to the RTC of Quezon City, Branch 223, then presided by
public respondent 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.
On March 14, 2000, petitioners filed a Motion to Dismiss6 contending: first, there is no real party-in-
interest as the SPA of Gutierrez to bring the suit was already revoked by Legaspi on March 7,
2000, as evidenced by a Deed of Revocation,7 and, second, Gutierrez failed to establish that the
alleged armed men guarding the area were acting on orders of petitioners. On March 17, 2000,
petitioners also filed a Motion for Inhibition8 of the respondent judge on the ground of alleged
partiality in favor of private respondent.
On March 23, 2000, the trial court granted private respondent’s 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 Legaspi’s 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 plaintiff’s
application for a writ of preliminary injunction. Upon plaintiff’s 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.
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
On appeal, the Court of Appeals affirmed the decision of the trial court.12
Hence this petition, with the following assigned errors:
I
WHETHER THE CONTRACT OF AGENCY BETWEEN LEGASPI AND PRIVATE RESPONDENT
GUTIERREZ HAS BEEN EFFECTIVELY REVOKED BY LEGASPI.
II
WHETHER THE COMPLAINT AGAINST PETITIONERS SHOULD BE DISMISSED.
III
WHETHER RESPONDENT JUDGE OUGHT TO HAVE INHIBITED HIMSELF FROM FURTHER
PROCEEDING WITH THE CASE.
We find no merit in the petition.
20
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 as his agency is coupled with interest.
We agree with private respondent.
Art. 1868 of the Civil Code provides that by the contract of agency, an agent binds himself to
render some service or do something in representation or on behalf of another, known as the
principal, with the consent or authority of the latter.13
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 Legaspi’s
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 Legaspi’s 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 applicant’s 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
Section 3, Rule 58 of the 1997 Rules of Civil Procedure provides that a writ of preliminary
injunction may be issued when it is established:
(a) that the applicant is entitled to the relief demanded, the whole or part of such relief consists in
restraining the 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;
(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.
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 applicant’s 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 Legaspi’s
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 judge’s 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
21
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
judge’s appreciation or misappreciation of the sufficiency of evidence adduced by the parties, or
the correctness of a judge’s 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 latter’s death during the pendency of the case. The main case for
damages shall now be heard and tried before another judge.

IN VIEW WHEREOF, the impugned Orders of the trial court in Civil Case No. Q-00-40115, dated
March 23 and 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 pronouncement as to costs.

SO ORDERED.

22