G.R. No. 83122 October 19, 1990
Lessons Applicable: Effect of Non-Payment (Insurance)
Laws Applicable: Art. 19,Art. 20,Art. 21, Art. 2200 of the new Civil Code;Section 77 of the Insurance Code
- Valenzuela, General Agent of Philippine American General Insurance Company, Inc authorized to sell in behalf of Philamgen solicited marine insurance from Delta Motors, Inc. amounting to P4.4M entitling him to a 32% commission or P1.6M
- 1976-1978: premium payments of P1,946,886 were paid directly to Philamgen. Philamgen wanted a 50% share of Valenzuela's commission but Valenzuela refused.
- Because of his refusal, the officers of Philamgen reversed his commission due him, placed agency transactions on a cash and carry basis thus removing the 60-day credit for premiums due, threatened to cancel policies issued by his agency and leaked out the news that he has substantial accounts with Philamgen.
- December 27, 1978: His agency with Philamgen was terminated
- Valenzuela sought relief from the RTC
- RTC: favored Valenzuela with reinstatement, commission with interest, monthly compensatory damages, moral damages, attorney's fees and cost of suit
- CA modified by holding Philamgen and Valenzuela jointly and severally liable for the premium
ISSUE: W/N Valuenuela should be NOT be held liable since non-payment of the premium renders the policy invalid
HELD: YES. petition is GRANTED. RTC reinstated with modification that upon satisfaction of the judgment, contractual relationship is terminated
- The principal may not defeat the agent's right to indemnification by a termination of the contract of agency. 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.
- 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
- 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
- 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
- unless premium is paid, an insurance contract does not take effect
- since admittedly the premiums have not been paid, the policies issued have lapsed
- to sue Valenzuela for the unpaid premiums would be the height of injustice and unfair dealing
- 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."