G.R. No. L-36585, 16 July 1984

FACTS:

The plaintiff was and still is a licensed real estate broker, and as such licensed real estate broker on June 20, 1968, an agreement was entered into between him as party of the second part and the defendants spouses as party of the first part, whereby the former was constituted as exclusive sales agent of the defendants, its successors, heirs and assigns, to dispose of, sell, cede, transfer and convey the lots included in VILLA ALEGRE SUBDIVISION owned by the defendants, under the terms and conditions embodied in said agreement, the plaintiff acted for and in behalf of the defendants as their agent in the sale of the lots included in the VILLA ALEGRE SUBDIVISION;

That on September 27, 1968, the defendants terminated the services of plaintiff as their exclusive sales agent for the reason stated in the latter. The plaintiff filed a suit on the ground that he is entitled to a commission on the lots unsold because of the rescission of the contract.

ISSUE:

Whether or not the spouse Diolosa could terminate the agency agreement without paying damages to plaintiff.

RULING:

Article 1920 of the Civil Code of the Philippines notwithstanding, the defendants could not terminate the agency agreement at will without paying damages. The said agency agreement expressly stipulates … until all the subject property as subdivided is fully disposed of …” The testimony of Roberto Malundo that the plaintiff agreed to the intention of Mrs. Diolosa to reserve some lots for her own famay use cannot prevail over the clear terms of the agency agreement. Moreover, the plaintiff denied that there was an agreement to reserve any of the lots for the family of the defendants.

Under the contract, herein petitioners allowed the private respondent “to dispose of, sell, cede, transfer and convey … until out the subject property as subdivided is fully disposed of.” The authority to sell is not extinguished until all the lots have been disposed of. When, therefore, the petitioners revoked the contract with private respondent in a letter they become liable to the private respondent for damages for breach of contract.

And, it may be added that since the agency agreement, is a valid contract, the same may be rescinded only on grounds specified in Articles 1381 and 1382 of the Civil Code, as follows:

ART. 1381. The following contracts are rescissible:

(1) Those which are entered in to by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof;
(2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number;
(3) Those undertaken in fraud of creditors when the latter cannot in any other name collect the claims due them;
(4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority;
(5) All other contracts specially declared by law to be subject to rescission.

ART. 1382. Payments made in a state of insolvency for obligations to whose fulfillment the debtor could not be compelled at the time they were effected, are also rescissible.”

*Case digest by Catherine C. Velasco, LLB-IV, Andres Bonifacio College, SY 2019 – 2020