G.R. No. 141525 - Sanchez vs. Medicard Philippines, Inc.

In 1987, Medicard Philippines, Inc. (Medicard) appointed Carlos Sanchez as its special corporate agent.
As a special corporate agent, Sanchez was to receive a commission based on the “cash brought in” from the business transacted by Medicard.

In September 1988, through Sanchez’s efforts, Medicard and United Laboratories Group of Companies (Unilab) entered into a Health Care Program Contract.
Under the contract, Unilab was obligated to pay Medicard a fixed monthly premium for health insurance coverage for its personnel.
Unilab paid Medicard P4,148,005.00 for a one-year premium, from which Sanchez received an 18% commission amounting to P746,640.90.

Through further efforts by Sanchez, the agency contract was renewed for another year—from October 1, 1989 to September 30, 1990.
The renewal incorporated an increase in the premium from P4,148,005.00 to P7,456,896.00.
Following the renewal, Medicard duly paid Sanchez a commission of P1,342,241.00.

Before the expiration of the renewed contract, Medicard proposed to Unilab, via Sanchez, an increase in the premium for the subsequent year.
Unilab rejected the proposed increase, citing that the premium was too high.
In response, Dr. Nicanor Montoya, Medicard’s president and general manager, requested Sanchez to reduce his commission, to which Sanchez refused.

On October 3, 1990, Unilab, represented by Carlos Ejercito, confirmed its decision not to renew the Health Care Program Contract with Medicard.
To ensure the continuation of health insurance coverage for its personnel, Unilab entered into negotiations with Medicard’s officers, excluding Sanchez, with the aim of preserving employee benefits.
The resulting new arrangement adopted a “cost plus” system whereby Unilab would pay Medicard only the actual hospitalization expenses incurred plus a 15% service fee, with a minimum payment of P780,000.00.
Under the new “cost plus” scheme, Sanchez was not given any commission.

On March 15, 1991, Sanchez demanded from Medicard payment of P338,000.00 as his commission plus damages, which Medicard refused.
Subsequently, Sanchez filed a complaint for sum of money with the Regional Trial Court (RTC), Branch 66, Makati City, against Medicard, Dr. Nicanor Montoya, and Carlos Ejercito.
The RTC dismissed Sanchez’s complaint and the respondents’ counterclaim.
On appeal, the Court of Appeals (CA) affirmed the RTC’s decision, holding that:

There was no proof that the new “cost plus” contract aimed to deprive Sanchez of his commission.
Medicard’s revocation of Sanchez’s agency contract was justified, as the rejection of the premium increase by Unilab effectively terminated the Health Care Program Contract.
An agent is entitled to commission only when he is the efficient procuring cause of a sale, which did not apply in this case.

Sanchez’s motion for reconsideration before the CA was denied on January 12, 2000.

Whether the Court of Appeals erred in concluding that Medicard had revoked Sanchez’s agency contract, thereby nullifying his right to commission.

The core legal question was centered on the entitlement of an agent to a commission when a principal negotiates directly with a third party.
Whether Sanchez, by refusing to reduce his commission, forfeited his right as the procuring cause of the transaction in the context of the renewed contract’s non-execution.

The application and interpretation of the agency law principles, particularly:

The requirement that an agent must be the efficient procuring cause of a sale to earn a commission.
The effect of a principal’s direct intervention in business negotiations (as provided under Article 1924 of the Civil Code).