Spouses Briones took out a loan of ₱3,789,216.00 from iBank to purchase a BMW Z4 Roadster. The Spouses Briones executed a promissory note with chattel mortgage that required them to take out an insurance policy on the vehicle. The promissory note also gave iBank, as the Spouses Briones' attorney-infact, irrevocable authority to file an insurance claim in case of loss or damage to the vehicle.
Four months after, the mortgaged BMW Z4 Roadster was carnapped by three (3) armed men. 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. After the Spouses Briones finished paying the three (3)-month installment, iBank sent them a letter demanding full payment of the lost vehicle. Spouses Briones submitted a notice of claim with their insurance company, which denied the claim due to the delayed reporting of the lost vehicle.
iBank filed a complaint for replevin and/or sum of money against the Spouses Briones and a person named John Doe. RTC 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. RTC 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.
iBank appealed to the Court of Appeals. In addition, they posited that respondent Jerome's direct dealing with the insurance company was a revocation of the agency relationship between petitioner and respondents. The Court of Appeals upheld the RTC'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."
Q1: Does an agency relationship exist between the parties?
Yes, an agency exists between parties.
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." Also, Rallos v. Felix Go Chan & Sons Realty Corporation lays down the essential elements of agency such as: (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.
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. Petitioner was also authorized to collect the insurance proceeds as the beneficiary of the insurance policy. 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." Therefore, the agency relationship between the Spouses Briones and iBank is still existing and can be found based on the clear wording of the promissory note with chattel mortgage, which petitioner prepared and respondents signed.
Q2: Was the agency relationship revoked or terminated due to respondent’s direct dealing with the insurance company?
No, the agency relationship was not revoked or terminated.
Revocation as a form of extinguishing an agency under Article 1924 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. 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.
While a contract of agency is generally revocable at will as it is primarily based on trust and confidence, Article 1927 of the Civil Code provides the instances when an agency becomes irrevocable: Article 1927. 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.
