ARTURO P. VALENZUELA and HOSPITALITA N. VALENZUELA vs. THE HONORABLE COURT OF APPEALS, BIENVENIDO M. ARAGON

G.R. No. 83122   October 19, 1990

FACTS

Petitioner Valenzuela is a General Agent of private respondent Philippine American General Insurance Company, Inc. 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. Valenzuela solicited marine insurance from one of his clients, the Delta Motors, Inc. in the amount of P4.4 Million. However, Valenzuela did not receive his full commission which amounted to P1.6 Million. Philamgen started to become interested in and expressed its intent to share in the commission due Valenzuela on a fifty-fifty basis. Valenzuela refused.

Because of the refusal of Valenzuela, Philamgen and its officers took drastic action against Valenzuela. The petitioners sought relief by filing the complaint against the private respondents in the court a quo.

ISSUE

Whether or not Philamgen and/or its officers can be held liable for damages due to the termination of the General Agency Agreement

RULING

Yes. In any event the principal's power to revoke an agency at will is so pervasive, that the Supreme Court has consistently held that termination may be effected even if the principal acts in bad faith, subject only to the principal's liability for damages. The lower court, however, thought the termination of Valenzuela as General Agent improper because the record will show the principal cause of the termination of the plaintiff as General Agent of defendant Philamgen was his refusal to share his Delta commission. 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. 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. 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. 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.