CMS Logging Inc. v. Court of Appeals

G.R. No. L-41420, 10 July 1992

FACTS:

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 1whereby 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. 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. Dominguez, discovered that DRACOR had used Shinko Trading Co.,Ltd. (Shinko for brevity) as agent, representative or liaison officer in selling CMS’s logs in Japan for which Shinko earned a commission ofU.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.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 form oral 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.

ISSUE:

Whether the principal may revoke a contact of agency at will.

RULING:

No. 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.

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.

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.

*Case digest by April Rose B. Tuanda, JD – 4, Andres Bonifacio College, SY 2019 – 2020

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