NOW UNION BANK OF THE PHILIPPINES vs. SPOUSES JEROME

FACTS: Spouses Briones took out a loan which was executed though a promissory note which appointed the bank as attorney-in-fact of the spouse with the obligation among others to file an insurance claim in case of loss or damage to the vehicle of the car.

The vehicle was subsequently carnapped. iBank instead of filing for insurance filed in behalf of Spouses it collected from former. Now respondents was forced to claim for insurance.

ISSUES: 1) Whether an agency relationship existed between the parties.

2)Whether the agency relationship was revoked or terminated when Spouses Briones themselves claimed for insurance.

3) Whether petitioner is entitled to the return of the mortgaged vehicle or, in the alternative, payment of the outstanding balance of the loan taken out for the mortgaged vehicle.

HELD: 1) The Supreme Court ruled in affirmative. All the elements of agency exist in this case. Under the promissory note with chattel mortgage, Spouses Briones appointed iBank as their attorney-in-fact, authorizing it to file a claim with the insurance company if the mortgaged vehicle was lost or damaged. Petitioner was also authorized to collect the insurance proceeds as the beneficiary of the insurance policy. Sections 6 and 22 of the promissory note 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. (Emphasis supplied, citation omitted).

Article 1370 of the Civil Code is categorical that when “the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control.”

The determination of agency is ultimately factual in nature and this Court sees no reason to reverse the findings of the Regional Trial Court and the Court of Appeals. They both found the existence of an agency relationship between the Spouses Briones and iBank, based on the clear wording of Sections 6 and 22 of the promissory note with chattel mortgage, which petitioner prepared and respondents signed.

2)           The Court ruled that the agency was not revoked. In the promissory note with chattel mortgage, the Spouses Briones authorized petitioner to claim, collect, and apply· the insurance proceeds towards the full satisfaction of their loan if the mortgaged vehicle were lost or damaged. Clearly, a bilateral contract existed between the parties, making the agency irrevocable. Petitioner was also aware of the bilateral contract; thus, it included the designation of an irrevocable agency in the promissory note with chattel mortgage that it prepared for the Spouses Briones to sign.

3)           The Court ruled that it was as the agent, petitioner was mandated to look after the interests of the Spouses Briones. However, instead of going after the insurance proceeds, as expected of it as the agent, petitioner opted to claim the full amount from the Spouses Briones, disregard the established principal-agency relationship, and put its own interests before those of its principal.

The facts show that the insurance policy was valid when the vehicle was lost, and that the insurance claim was only denied because of the belated filing. Having been negligent in its duties as the duly constituted agent, petitioner must be held liable for the damages suffered by the Spouses Briones because of non-performance of its obligation as the agent, and because it prioritized its interests over that of its principal.

Furthermore, petitioner’s bad faith was evident when it advised the Spouses Briones to continue paying three (3) monthly installments after the loss, purportedly to show their good faith. A principal and an agent enjoy a fiduciary relationship marked with trust and confidence, therefore, the agent has the duty “to act in good faith [to advance] the interests of [its] principal.”

If petitioner was indeed acting in good faith, it could have timely informed the Spouses Briones that it was terminating the agency and its right to file an insurance claim, and could have advised them to facilitate the insurance proceeds themselves. Petitioner’s failure to do so only compounds its negligence and underscores its bad faith. Thus, it will be inequitable now to compel the Spouses Briones to pay the full amount of the lost property.