Case Summary (G.R. No. 219164)
Key Dates
Loan executed: July 2, 2003.
Carnapping incident: November 5, 2003.
Insurance claim filed by respondents: April 30, 2004; denied June 29, 2004.
RTC Decision: June 16, 2011.
CA Decision: September 27, 2012; denial of MR: February 6, 2013.
Supreme Court Decision (denying petition): March 29, 2017.
Applicable Law and Authorities
Constitutional basis: 1987 Philippine Constitution (decision rendered after 1990).
Civil Code provisions cited in the decision: Articles 1868 (definition of agency), 1884 (agent’s obligation and liability for non-performance), 1889 (liability for conflicts of interest), 1370 (literal interpretation of clear contract terms), 1924 (revocation by principal directly dealing with third persons), and 1927 (instances when agency is irrevocable).
Relevant jurisprudence cited: Rallos v. Felix Go Chan & Sons Realty Corp.; Lim v. Saban; Republic v. Evangelista; Bitte v. Spouses Jonas; Bank of the Philippine Islands v. Laingo.
Factual Background
Spouses Briones borrowed P3,789,216.00 from iBank on July 2, 2003 to purchase a BMW Z4 Roadster, secured by a promissory note with chattel mortgage. Monthly amortization was P78,942.00 for two years. The promissory note required that the vehicle be insured with proceeds payable to iBank and expressly appointed iBank as irrevocable attorney-in-fact to file and pursue insurance claims and to collect proceeds to the extent of the bank’s interest. On November 5, 2003 the vehicle was carnapped. The Brioneses reported the loss to police and notified iBank, and at iBank’s instruction they continued paying three monthly installments. After those installments, iBank demanded full payment of the loan. Because iBank did not file the insurance claim, the Spouses Briones filed a claim on April 30, 2004, which was denied for delayed reporting. iBank then sued for replevin and/or sum of money claiming default.
Procedural History
RTC, Branch 138, Makati City: After pre-trial, mediation, and trial on the merits, the RTC dismissed iBank’s complaint, finding that iBank, as attorney-in-fact, had the obligation to file and pursue the insurance claim and that its failure to do so prioritized its own interest over the principal’s, resulting in damages to the Brioneses; the RTC found compensation extinguished and dismissed the case.
Court of Appeals: Affirmed the RTC’s decision, holding the promissory note’s agency provisions clear, finding iBank bound to perform the agency duties but instead sought to collect the loan, and holding iBank liable for damages resulting from its inaction which led to denial of the insurance claim. Motion for reconsideration denied.
Supreme Court: Petition for review on certiorari by iBank denied; CA decisions affirmed.
Legal Issues Presented
- Whether an agency relationship existed between the parties.
- Whether that agency relationship was revoked or terminated.
- Whether iBank was entitled to the return of the mortgaged vehicle or, alternatively, payment of the outstanding loan balance.
Court’s Finding on Existence of Agency
The Court found all elements of agency present. The promissory note with chattel mortgage expressly appointed iBank as attorney-in-fact with authority to file, follow up, prosecute, compromise or settle insurance claims and to collect insurance proceeds to the extent of its interest. Article 1370 was applied to give literal effect to clear contractual stipulations. The factual determinations by the RTC and CA that an agency existed were upheld.
Court’s Finding on Revocation or Termination of Agency
The Court rejected iBank’s contention that the Brioneses’ filing of their own insurance claim effectively revoked the agency. It explained that revocation under Article 1924 requires the principal to directly manage the business entrusted to the agent or deal with third persons in a manner that excludes the agent. The Brioneses immediately reported the loss to iBank and continued paying installments for three months at iBank’s instruction. They filed a claim only after iBank demanded full payment and declined or failed to file the insurance claim; thus their action was not an implied revocation but a consequence of the agent’s negligence. The Court also emphasized that the promissory note evidenced a bilateral contract making the agency irrevocable under Article 1927 (agency coupled with an interest), since iBank’s authority to collect insurance proceeds was integral to satisfying the loan.
Court’s Finding on iBank’s Duties and Lia
...continue readingCase Syllabus (G.R. No. 219164)
Parties and Their Roles
- Petitioner: International Exchange Bank (iBank), now Union Bank of the Philippines.
- Respondents: Spouses Jerome and Quinnie Briones, and John Doe.
- iBank acted as mortgagee and was designated in the promissory note with chattel mortgage as attorney‑in‑fact (agent) of the Spouses Briones for the purpose of filing and processing insurance claims and collecting insurance proceeds.
- Spouses Briones were the mortgagors/borrowers who purchased the mortgaged vehicle (BMW Z4 Roadster) with a loan from iBank and who executed the promissory note with chattel mortgage prepared by petitioner.
Case Caption, Decision, and Bench
- Case citation: 808 Phil. 223, Second Division, G.R. No. 205657, March 29, 2017.
- Decision authored by Justice Leonen.
- Concurrence: Carpio (Chairperson), Peralta, and Martires, JJ.
- Justice Mendoza was on official leave.
- The decision resolves a Petition for Review on Certiorari challenging the Court of Appeals’ September 27, 2012 Decision and February 6, 2013 Resolution in CA‑G.R. CV. No. 97453, which affirmed the Regional Trial Court, Branch 138, Makati City, June 16, 2011 Decision in Civil Case No. 04‑557.
Factual Background — Loan, Security, and Insurance Stipulations
- On July 2, 2003, the Spouses Briones obtained a loan of P3,789,216.00 from iBank to purchase a BMW Z4 Roadster.
- Monthly amortization was P78,942.00 for a two‑year term.
- The Spouses Briones executed a promissory note with chattel mortgage that required them to obtain insurance on the vehicle.
- The promissory note expressly provided that insurance proceeds were to be made payable to iBank as mortgagee.
- The promissory note also: (a) appointed iBank as attorney‑in‑fact with irrevocable authority to file, follow up, prosecute, compromise or settle insurance claims; (b) authorized iBank to apply, sign, follow‑up and secure documents necessary to process the insurance claim; and (c) authorized iBank to collect insurance proceeds “to the extent of its interest.”
- Sections 6 and 22 of the promissory note, as quoted in the source, state:
- “The MORTGAGOR agrees that he will cause the mortgaged property/ies to be insured against loss or damage by accident, theft and fire . . . with an insurance company/ies acceptable to the MORTGAGEE . . .; that he will make all loss, if any, under such policy/ies payable to the MORTGAGEE or its assigns . . . [w]ith the proceeds thereon in case of loss, payable to the said MORTGAGEE or its assigns . . . shall be added to the principal indebtedness hereby secured . . . [M]ortgagor hereby further constitutes the MORTGAGEE to be its/his/her Attorney‑in‑Fact for the purpose of filing claims with insurance company including but not limited to apply, sign, follow‑up and secure any documents, deeds . . . that may be required by the insurance company to process the insurance claim . . .”
- “In case of loss or damage, the MORTGAGOR hereby irrevocably appoints the MORTGAGEE or its assigns as his attorney‑in‑fact with full power and authority to file, follow‑up, prosecute, compromise or settle insurance claims; to sign, execute and deliver the corresponding papers, receipt and documents to the insurance company as may be necessary to prove the claim, and to collect from the latter the proceeds of insurance to the extent of its interest.”
Chronology of Material Events
- November 5, 2003, ~10:50 p.m.: The mortgaged BMW Z4 Roadster was carnapped by three armed men in front of Metrobank Banlat Branch in Tandang Sora, Quezon City.
- Jerome Briones immediately reported the carnapping to the Philippine National Police Traffic Management Group.
- The Spouses Briones declared the loss to iBank.
- iBank instructed the Spouses Briones to continue paying the next three monthly installments “as a sign of good faith,” which the spouses complied with.
- March 26, 2004: After the three months of continued payments, iBank sent a letter demanding full payment of the lost vehicle.
- April 30, 2004: The Spouses Briones submitted a notice of claim with their insurance company.
- June 29, 2004: The insurance company denied the Spouses Briones’ claim on the ground of delayed reporting (belated filing).
- May 14, 2004: iBank filed a complaint for replevin and/or sum of money against Spouses Briones and John Doe, alleging default in paying monthly amortizations of the mortgaged vehicle.
Procedural History
- Pretrial and mediation: Pre‑trial conference failed to produce settlement; case referred to Mediation and Judicial Dispute Resolution; mediation also failed.
- Regional Trial Court, Branch 138, Makati City:
- After pretrial and trial on the merits, the RTC dismissed iBank’s complaint.
- RTC’s reasoning: iBank, as attorney‑in‑fact of the Spouses Briones, had the obligation to facilitate filing and to pursue release of insurance proceeds; iBank prioritized its interest over that of its principal by failing to file the insurance claim and then demanding full payment.
- RTC dispositive language: “WHEREFORE, premises considered, judgment is hereby rendered dismissing this case as the obligation of both parties to each other has already been considered extinguished by compensation. SO ORDERED.” (Emphasis in the original)
- Court of Appeals, Fourth Division:
- iBank appealed; Court of Appeals dismissed the appeal on September 27, 2012 and denied iBank’s motion for reconsideration on February 6, 2013.
- The Court of Appeals found the promissory note’s terms clear; reiterated Sections 6 and 22; affirmed existence of agency and iBank’s obligation to perform as agent; held that iBank’s inaction caused denial of insurance claim for delayed filing; held iBank liable for damages to Spouses Briones.
- Court of Appeals dispositive language: “WHEREFORE, the instant appeal is hereby DENIED. The assailed Decision dated June 16, 2011 of the Regional Trial Court, Branch 138, Makati City is AFFIRMED. SO ORDERED.” (Emphasis in the original)
- Supreme Court (this