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Case Citation: GR No. L-41420
Date: July 10, 1992
Petitioners: CMS Logging, Inc
Respondents: CA and D.R Aguinaldo Corporation (DRACOR)
Doctrine: Under the laws of agency, the principal may revoke a contract of agency at will, and
such revocation may be express, or implied, and may be availed of even if the period
fixed in the contract of agency as not yet expired. As the principal has this absolute
right to revoke the agency, the agent cannot object thereto; neither may he claim
damages arising from such revocation, unless it is shown that such was done in order
to evade the payment of agent's commission.
An implied revocation of the contract of agency is provided under Article 1924 of the
Civil Code which states: “The agency is revoked if the principal directly manages the
business entrusted to the agent, dealing directly with third persons.”
Antecedent CMS Logging Inc (PRINCIPAL) – forest concessionaire engaged in the logging
Facts: business
DRACOR (AGENT) – engaged in the business of exporting and selling logs and
lumber
Shinko Trading Co (AGENT APPOINTED BY DRACOR)
CMS and DRACOR entered into a contract of agency whereby CMS appointed
DRACOR as its exclusive export and sales agent for all logs that CMS may produce
for a period of 5 years; DRACOR shall receive 5% commission of the gross sales of
logs of CMS based on F.O.B invoice value
CMS was able to sell through DRACOR a total of 77,264.672 board feet of logs in
Japan
6 months prior to the expiration of the contract, while on a trip to Tokyo, Japan,
CMS’ president Atty Carlos Sison and general manager & legal counsel Atty
Teodoro Dominguez, discovered that DRACOR had used Shinko Trading Co as
agent/representative/liaison officer in selling CMS’ logs in Japan for which allegedly
Shinko earned a commission
Upon learning Shinko’s employment by DRACOR as the latter’s agent, CMS sold
and shipped logs directly to several firms in Japan without the aid/intervention of
DRACOR
Thereafter, CMS filed a complaint against DRACOR claiming that the commission
paid to Shinko by DRACOR was in violation of the contract of agency and that CMS
is entitled thereto as part of the proceeds of the sale of the logs. CMS also
contended that since DRACOR had been paid the 5% commission under the
contract, it is no longer entitled to the additional compensation paid to Shinko as
this tantamount to DRACOR receiving double compensation for the services it
rendered. Thus, CMS sued DRACOR for moral and exemplary damages it suffered.
MTC/RTC Ruling: Dismissed CMS’ complaint; it ruled that no evidence was presented to show that
Shinko received the commission of DRACOR arising from the sale of CMS’ logs in
Japan
CA Ruling: Affirmed RTC; it ruled that Shinko was paid by DRACOR out of its own 5% commission
Issue: 1. W/N Shinko received the 5% commission of DRACOR? NO.
2. W/N CA erred in holding that DRACOR was entitled to its commission from the sales
made by CMS to Japanese firms? YES.
SC Ruling: 1. SC held that while it is true that the evidence adduced establishes the fact that
Shinko is DRACOR's agent or liaison in Japan, 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. Dominguez (CMS’ general manager) 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. These statements
neither declared categorically that Shinko did in fact receive the commissions and that
these arose from the sale of CMS’ logs.
SC adopted CA’s findings 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.
Moreover, even if it was shown that Shinko did in fact receive the commissions in
question, CMS is not entitled thereto since these were apparently paid by the
buyers to Shinko for arranging the sale. This is therefore not part of the gross sales
of CMS's logs.
2. Under the laws of agency, the principal may revoke a contract of agency at will, and
such revocation may be express, or implied, and may be availed of even if the period
fixed in the contract of agency as not yet expired. As the principal has this absolute
right to revoke the agency, the agent cannot object thereto; neither may he claim
damages arising from such revocation, unless it is shown that such was done in order
to evade the payment of agent's commission.
Here, 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 states: “The agency is revoked if the principal directly manages the business
entrusted to the agent, dealing directly with third persons.” Thus, DRACOR has no
right to its 5% commission.
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.
In fine, SC affirmed CA’s ruling 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, SC reversed CA’s ruling
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.
