G.R. No. 129919 - Dominion Insurance Corp. vs. Court of Appeals

Case Summary (G.R. No. 129919)

Procedural History

Guevarra filed Civil Case No. 8855 on January 25, 1991 claiming P156,473.90 advanced to settle claims of Dominion’s insureds. Dominion denied liability and counterclaimed for unpaid premiums; it filed a third‑party complaint against Austria. Multiple pre‑trial dates were set and repeatedly postponed. On May 22, 1992, Dominion failed to appear and the trial court declared it in default and allowed Guevarra to present evidence (June 16, 1992). Dominion’s subsequent motions to lift the default were denied. On November 18, 1992 the trial court rendered judgment ordering Dominion to pay P156,473.90 plus attorney’s fees P10,000, dismissed Dominion’s counterclaim and third‑party complaint, and taxed costs. Dominion appealed to the Court of Appeals; the CA affirmed (promulgated July 19, 1996) and denied reconsideration (July 16, 1997). The Supreme Court denied the petition but modified the award.

Core Facts Found by the Courts

Guevarra acted as Agency Manager under a written Special Power of Attorney (SPA) and a Memorandum of Management Agreement (February 18, 1987). The SPA appointed Guevarra to conduct and transact bonding and insurance business, accept and underwrite cover notes/policies, collect and give receipts for monies due the principal, and receive legal processes. The Memorandum expressly authorized Guevarra to settle motor car claims up to P5,000 with prior Regional Office approval and to fully handle TPPI claims. A written standard “authority to pay” required that payment be made from Guevarra’s revolving fund/collections. Guevarra, however, paid certain claims using his personal funds and later sought reimbursement from Dominion.

Trial Court’s Default Ruling and Evidence Admission

The trial court declared Dominion in default for failure to appear at pre‑trial despite notice; Guevarra presented his evidence and documentary exhibits, which were admitted. Dominion later moved to lift the default on grounds of unavoidable circumstances and counsel’s illness; the trial court denied the motion (initially for lack of verification/affidavit of merit and later after consideration), and proceeded to judgment for Guevarra.

Issues Presented to the Supreme Court

(1) Whether Guevarra acted within his authority as agent of Dominion; and (2) whether Guevarra is entitled to reimbursement for amounts he personally paid in settling insureds’ claims.

Existence of Agency

The Court affirmed that an agency relationship existed. Under Article 1869 Civil Code and related jurisprudence, agency requires a principal’s intention to appoint and an agent’s acceptance to act on behalf of the principal. The SPA and subsequent instruments showed both parties intended a principal‑agent relationship. Although titled a “Special Power of Attorney,” the SPA’s language constituted a general agency limited to acts of administration that the law does not require to be conferred by a special power.

Scope of Authority and Requirement of a Special Power

The Court analyzed the scope of Guevarra’s authority. Article 1878 Civil Code lists acts requiring a special power of attorney, including payments “not usually considered acts of administration” and any act of strict dominion. The Court held that settlement of claims is not an act of administration and thus requires a special power of attorney. The SPA did not expressly authorize settling claims; therefore, settlement authority was not conferred by the SPA alone.

Specific Written Limits: Memorandum and Revolving Fund

The Memorandum of Management Agreement did grant limited authority to settle certain claims (e.g., motor car claims up to P5,000 with prior Regional Office approval; full authority on TPPI claims), but it also strictly conditioned payment on use of Guevarra’s revolving fund/collections pursuant to a written standard authority to pay signed by the Regional Manager (Austria). The Regional Manager’s instruction was explicit: payments must come from the agent’s revolving fund/collection and release papers were to be signed and attached to claim folders.

Application of Agency Law (Article 1918) — Agent Contravening Instructions

Because Guevarra deviated from the Regional Manager’s instruction by using his personal funds rather than the revolving fund, the Court applied Article 1918 Civil Code: the principal is not liable for expenses incurred by the agent when the agent acts in contravention of the principal’s instructions, unless the principal elects to avail himself of the benefits. Under this rule, Dominion would not be strictly liable to reimburse expenses incurred in contravention of instructions.

Application of General Law on Obligations and Unjust Enrichment (Article 1236)

The Court nevertheless recognized an independent basis for reimbursement under Article 1236, second paragraph: “Whoever pays for another may demand from the debtor what he has paid,”

Case Syllabus (G.R. No. 129919)

The Case

This is an appeal via certiorari under Rule 45, Revised Rules of Court, from the decision of the Court of Appeals in CA-G.R. CV No. 40803, promulgated July 19, 1996, which affirmed the decision of the Regional Trial Court, Branch 44, San Fernando, Pampanga, in Civil Case No. 8855.
Petitioner: Dominion Insurance Corporation (formerly First Continental Assurance Company, Inc.).
Respondents: Court of Appeals, Rodolfo S. Guevarra, and Fernando Austria.
The trial court ordered Dominion to pay respondent Guevarra P156,473.90 for amounts allegedly advanced by Guevarra in payment of Dominion’s clients’ claims; this judgment was affirmed by the Court of Appeals and led to the present petition to the Supreme Court.
The Supreme Court (Pardo, J., ponente) resolved the petition by denying it in part but modifying the judgment of the courts below to an order directing petitioner to pay respondent Guevarra P112,672.11; no costs were awarded.

Procedural History and Key Dates

January 25, 1991: Rodolfo S. Guevarra instituted Civil Case No. 8855 for sum of money against Dominion, seeking P156,473.90.
August 8, 1991: Dominion filed a third-party complaint against Fernando Austria, then Regional Manager for Central Luzon.
Multiple pre-trial conference settings were scheduled (October 18, 1991; November 12, 1991; March 29, 1991; December 12, 1991; January 17, 1992; January 29, 1992; February 28, 1992; March 17, 1992; April 6, 1992) with various cancellations and joint postponements; only three settings were cancelled at the instance of defendant, third-party defendant, and plaintiff respectively.
May 22, 1992: Pre-trial called; only plaintiff and counsel appeared. Dominion did not appear; a messenger presented a handwritten note requesting postponement. Plaintiff’s counsel moved to declare defendant in default; the trial court granted the default declaration and allowed plaintiff to present evidence on June 16, 1992.
June 16, 1992: Plaintiff presented evidence.
July 8 and July 13, 1992: Written offer of documentary exhibits and supplemental offer filed; exhibits admitted by order dated July 17, 1992.
August 7, 1992: Dominion filed Motion to Lift Order of Default alleging unavoidable circumstances for counsel’s nonappearance; motion opposed by plaintiff.
August 25, 1992: Trial court denied motion to lift default (motion not verified or supported by affidavit of merit and failed to allege meritorious defense).
September 28, 1992: Dominion moved for reconsideration, attaching for the first time counsel’s illness and an Affidavit of Merit executed by Executive Vice-President; November 13, 1992: trial court denied reconsideration.
November 18, 1992: Trial court rendered judgment ordering payment to plaintiff P156,473.90, attorney’s fees P10,000.00, dismissal of counterclaim and third-party complaint, and costs of suit.
December 14, 1992: Dominion appealed to the Court of Appeals (Notice of Appeal in original record).
July 19, 1996: Court of Appeals promulgated decision affirming trial court.
September 3, 1996: Dominion filed motion for reconsideration in the Court of Appeals.
July 16, 1997: Court of Appeals denied the motion for reconsideration.
September 8, 1997: Petition for certiorari filed with the Supreme Court; January 31, 2000: Supreme Court resolved to give due course to the petition.
February 6, 2002 (G.R. No. 129919): Supreme Court decision (reported 426 Phil. 620; 99 OG No. 35, 5438, September 2, 2003).

The Claims and Counterclaims

Plaintiff (Guevarra) claimed P156,473.90 representing amounts advanced by him, in his capacity as manager of the defendant, to satisfy claims of Dominion’s clients.
Dominion denied liability and asserted a counterclaim for P249,672.53 for premiums Plaintiff allegedly failed to remit.
Dominion filed third-party complaint against Fernando Austria (Regional Manager) in relation to the dispute.
Trial court dismissed defendant’s counterclaim and the third-party complaint in its November 18, 1992 judgment.

Key Evidence and Exhibits

Special Power of Attorney (Original Record, Civil Case No. 8855, p. 235) establishing the agency relationship between First Continental Assurance Company, Inc. (now Dominion) and RSG Guevarra Insurance Services represented by Rodolfo Guevarra; the document’s contents were analyzed to determine the scope of authority.
Memorandum of Management Agreement dated February 18, 1987 (Original Record, Civil Case No. 8855, pp. 236-237) setting out Guevarra’s duties and limits, including specific authority to settle certain claims with prior approval of the Regional Office and full authority on TPPI claims settlement.
Written standard "authority to pay" (Original Record, Civil Case No. 8855, p. 299) authorizing withdrawals from the revolving fund/collection for payments and signed by Fernando C. Austria, Regional Manager.
Release of Claim Loss and Subrogation Receipts attached to complaint as Annexes C-2, D-1, E-1, F-1, G-1, H-1, I-1 and J-1 (Original Records, Civil Case No. 8855, pp. 11, 13, 15, 17, 19, 21, 23, 25), totaling P116,276.95.
Statement of account dated July 11, 1990 (reflecting revolving fund/collection in Guevarra’s possession) showing an outstanding balance and production/remittance for the period corresponding to the claims of P3,604.84.

Agency Relationship: Formation and Nature

The Court reiterated the legal definition of agency: "by the contract of agency, 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" (Article 1869, Civil Code).
Agency is based on representation; a principal must have actual intention to appoint or an intention inferrable from words/actions; an agent must intend to accept and act — citations include Bordador v. Luz and Victorias Milling Co., Inc. v. Court of Appeals.
The Special Power of Attorney, although titled "special," contained terms showing the parties intended a principal-agent relationship and in substance constituted a general agency.
The Special Power of Attorney expressly authorized the age