G.R. No. 76931, 29 May 1991
FACTS:
American Airlines, Inc. an air carrier offering passenger and air cargo transportation in the Philippines, and Orient Air Services and Hotel Representatives, entered into a General Sales Agency Agreement, whereby the former authorized the latter to act as its exclusive general sales agent within the Philippines for the sale of air passenger transportation.
Alleging that Orient Air had reneged on its obligations under the Agreement by failing to promptly remit the net proceeds of sales for the months of January to March 1981 in the amount of US $254,400.40, American Air by itself undertook the collection of the proceeds of tickets sold originally by Orient Air and terminated forthwith the Agreement in accordance with Paragraph 13 thereof. The aforesaid basis for the termination of the Agreement as well as therein defendant’s previous record of failures “to promptly settle past outstanding refunds of which there were available funds in the possession of the defendant, . . . to the damage and prejudice of plaintiff.”
ISSUE:
Whether there is propriety of American Air’s termination of the Agreement.
RULING:
We agree with the findings of the respondent appellate court. As earlier established, Orient Air was entitled to an overriding commission based on total flown revenue. American Air’s perception that Orient Air was remiss or in default of its obligations under the Agreement was, in fact, a situation where the latter acted in accordance with the Agreement—that of retaining from the sales proceeds its accrued commissions before remitting the balance to American Air. Since the latter was still obligated to Orient Air by way of such commissions. Orient Air was clearly justified in retaining and refusing to remit the sums claimed by American Air. The latter’s termination of the Agreement was, therefore, without cause and basis, for which it should be held liable to Orient Air.
It is believed, however, that respondent appellate court erred in affirming the rest of the decision of the trial court. We refer particularly to the lower court’s decision ordering American Air to “reinstate defendant as its general sales agent for passenger transportation in the Philippines in accordance with said GSA Agreement.”
By affirming this ruling of the trial court, respondent appellate court, in effect, compels American Air to extend its personality to Orient Air. Such would be violative of the principles and essence of agency, defined by law as a contract whereby “a person binds himself to render some service or to do something in representation or on behalf of another, WITH THE CONSENT OR AUTHORITY OF THE LATTER.” In an agent-principal relationship, the personality of the principal is extended through the facility of the agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts which the latter would have him do. Such a relationship can only be effected with the consent of the principal, which must not, in any way, be compelled by law or by any court. The Agreement itself between the parties states that “either party may terminate the Agreement without cause by giving the other 30 days’ notice by letter, telegram or cable.”
*Case digest by Meriam Rika R. Wong, JD-IV, Andres Bonifacio College, SY 2019 – 2020