Modes of Extinguishment of Agency

1. Expiration of the period for which the agency was constituted

● When the agency was created for a specific period of time, and the period has expired, it is automatically terminated.

● When an agency is created for a fixed period, the expiration of such period ends the agency, even though the purpose for which the agency was created has not been accomplished.

● If there is a period stipulated in the agency contract, the principal may still revoke the agent’s authority at will; but principal will be liable for damages. (Dialosa v CA)

2. Death, civil interdiction, insanity, insolvency

3. Withdrawal of the Agent

The agent, even if he should withdraw from the agency for a valid reason, must continue to act until the principal has had reasonable opportunity to take the necessary steps to meet the situation. (Art. 1929, CC). This is to prevent damage or prejudice to the principal.

4. Accomplishment of the object or purpose of the agency

5. Revocation

6. Dissolution of the firm or corporation which entrusted or accepted the agency

Dissolution of a corporation extinguishes its juridical existence.

Irrevocable Agency

What are the exceptions to the rule that agency is revocable at will by the principal?

Agency is not revocable at will in the following cases:

1. If a bilateral contract depends upon it;

2. If it is the means of fulfilling an obligation already contracted;

3. If a partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable;

4. If it has been constituted in the common interest of the latter and of the agent, or in the interest of a third person who has accepted the stipulation in his favor. (Art. 1927, 1930, CC)

If an agency is coupled with an interest, does this mean that the principal can never ever revoke it?

No. He can still revoke in extreme situations, e.g.:

1.) The authority can be revoked for a just cause, such as when the attorney-in-fact betrays the interest of the principal. of the power of attorney may not be used to shield the perpetration of acts in bad faith, breach of confidence, or betrayal of trust, by the agent for that would amount to holding that a power coupled with an interest authorizes the agent to commit frauds against the principal. (Coleongco vs. Claparols, G.R. No. L-18616, March 31, 1964)

2.) When the interest is already terminated.

Jurisprudence:

● Powers of attorney falling under Art. 1927 cannot be revoked at the pleasure of the principal, but may be revoked for a just cause, such as when the attorney-in-fact betrays the interest of the principal. (Coleongco vs. Claparols, G.R. No. L-18616, March 31, 1964)

● A mere statement in the power of attorney that it is coupled with an interest is not enough. In what does such interest consist must be stated in the power of attorney. (Del Rosario vs. Abad, G.R. No. L-10881, September 30, 1958)

Compromise

What is a contract of compromise?

A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced. (Art. 2028, Civil Code)

What are void compromises?

No compromise upon the following questions shall be valid:

(1) The civil status of persons;

(2) The validity of a marriage or a legal separation;

(3) Any ground for legal separation;

(4) Future support;

(5) The jurisdiction of courts;

(6) Future legitime. (Art. 2035, Civil Code)

What is the effect of a compromise?

A compromise has upon the parties the effect and authority of res judicata; but there shall be no execution except in compliance with a judicial compromise. (Art. 2037, Civil Code)

What is the remedy if one of the parties fails or refuses to abide by the compromise?

If one of the parties fails or refuses to abide by the compromise, the other party may either enforce the compromise or regard it as rescinded and insist upon his original demand. (Art. 2041, Civil Code)

Jurisprudence:

● Judicial vs. extrajudicial compromise

Under Article 2028 of the Civil Code, a compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced. Accordingly, a compromise is either judicial, if the objective is to put an end to a pending litigation, or extrajudicial, if the objective is to avoid a litigation. As a contract, a compromise is perfected by mutual consent. However, a judicial compromise, while immediately binding between the parties upon its execution, is not executory until it is approved by the court and reduced to a judgment. The validity of a compromise is dependent upon its compliance with the requisites and principles of contracts dictated by law. Also, the terms and conditions of a compromise must not be contrary to law, morals, good customs, public policy and public order. (Land Bank of the Philippines vs. Heirs of Spouses Jorja Rigor Soriano and Magin Soriano, G.R. No. 178312. January 30, 2013)

●  Compromise agreement has the force of law and is conclusive between the parties

We have time and again ruled that a compromise agreement, when not contrary to law, public order, public policy, morals, or good customs, is a valid contract which is the law between the parties. It is a contract perfected by mere consent, whereby the parties, making reciprocal concessions, avoid litigation or put an end to one already commenced.  It has the force of law and is conclusive between the parties, and courts will not relieve parties from obligations voluntarily assumed, simply because their contracts turned out to be unwise. (Cachopero vs. Celestial, G.R. No. 146754, March 21, 2012 citing Air Transportation Office v. Gopuco, Jr., 501 Phil. 228 (2005)

●  A decision on a compromise agreement is final and executory

Prevailing case law provides that a compromise once approved by final orders of the court has the force of res judicata between the parties and should not be disturbed except for vices of consent or forgery. Hence, a decision on a compromise agreement is final and executory.  Such agreement has the force of law and is conclusive on the parties. It transcends its identity as a mere contract binding only upon the parties thereto, as it becomes a judgment that is subject to execution in accordance with the Rules. Judges therefore have the ministerial and mandatory duty to implement and enforce it. Hence, compromise agreements duly approved by the courts are considered the decisions in the particular cases they involve. (Cachopero vs. Celestial, G.R. No. 146754, March 21, 2012 citing PNOC-EDC) v. Abella, G.R. No. 153904, January 17, 2005, 448 SCRA 549

● A compromise agreement must comply with the requisites in Article 1318

It must be emphasized, though, that like any other contract, a compromise agreement must comply with the requisites in Article 1318 of the Civil Code, to wit:  (a) consent of the contracting parties; (b) object certain that is the subject matter of the contract; and (c) cause of the obligation that is established.  And, like any other contract, the terms and conditions of a compromise agreement must not be contrary to law, morals, good customs, public policy and public order.  Any compromise agreement that is contrary to law or public policy is null and void, and vests no rights in and holds no obligation for any party.  It produces no legal effect at all. (Uy vs. Chua, G.R. 183965, September 18, 2009. 600 SCRA, 806)

● Status and filiation of a child cannot be compromised

The status and filiation of a child cannot be compromised.  Public policy demands that there be no compromise on the status and filiation of a child.  Paternity and filiation or the lack of the same, is a relationship that must be judicially established, and it is for the Court to declare its existence or absence. It cannot be left to the will or agreement of the parties. (Uy vs. Chua, G.R. 183965, September 18, 2009. 600 SCRA, 806)

●  Future support cannot be the subject of compromise

It appears that the former dismissal was predicated upon a compromise. Acknowledgment, affecting as it does the civil status of persons and future support, cannot be the subject of compromise. Hence, the first dismissal cannot have force and effect and can not bar the filing of another action, asking for the same relief against the same defendant. Conformably, notwithstanding the dismissal of Civil Case 88-935 and the lower courts pronouncement that such dismissal was with prejudice, the second action for support may still prosper. (De Asis vs. Andres, G.R. No. 127578, February 15, 1999)

● Two-tiered mode of enforcement of an amicable settlement

It is true that an amicable settlement reached at the barangay conciliation proceedings, like the Kasunduang Pag-aayos in this case, is binding between the contracting parties and, upon its perfection, is immediately executory insofar as it is not contrary to law, good morals, good customs, public order and public policy.

Being a by-product of mutual concessions and good faith of the parties, an amicable settlement has the force and effect of res judicata even if not judicially approved. It transcends being a mere contract binding only upon the parties thereto, and is akin to a judgment that is subject to execution in accordance with the Rules. Thus, under Section 417 of the Local Government Code, such amicable settlement or arbitration award may be enforced by execution by the Barangay Lupon within six (6) months from the date of settlement, or by filing an action to enforce such settlement in the appropriate city or municipal court, if beyond the six-month period.

Under the first remedy, the proceedings are covered by the Local Government Code and the Katarungang Pambarangay Implementing Rules and Regulations. The Punong Barangay is called upon during the hearing to determine solely the fact of non-compliance of the terms of the settlement and to give the defaulting party another chance at voluntarily complying with his obligation under the settlement. Under the second remedy, the proceedings are governed by the Rules of Court, as amended. The cause of action is the amicable settlement itself, which, by operation of law, has the force and effect of a final judgment.

It must be emphasized, however, that enforcement by execution of the amicable settlement, either under the first or the second remedy, is only applicable if the contracting parties have not repudiated such settlement within ten (10) days from the date thereof in accordance with Section 416 of the Local Government Code. If the amicable settlement is repudiated by one party, either expressly or impliedly, the other party has two options, namely, to enforce the compromise in accordance with the Local Government Code or Rules of Court as the case may be, or to consider it rescinded and insist upon his original demand. This is in accord with Article 2041 of the Civil Code, which qualifies the broad application of Article 2037. (Miguel vs. Montanez, G.R. No. 191336, January 25, 2012)

● No action for rescission is required

Article 2041 does not require an action for rescission, and the aggrieved party, by the breach of compromise agreement, may just consider it already rescinded. The language of this Article 2041, particularly when contrasted with that of Article 2039, denotes that no action for rescission is required in said Article 2041, and that the party aggrieved by the breach of a compromise agreement may, if he chooses, bring the suit contemplated or involved in his original demand, as if there had never been any compromise agreement, without bringing an action for rescission thereof. He need not seek a judicial declaration of rescission, for he may "regard" the compromise agreement already "rescinded(Miguel vs. Montanez, G.R. No. 191336, January 25, 2012)

In exercising the second option under Art. 2041, the aggrieved party may, if he chooses, bring the suit contemplated or involved in his original demand, as if there had never been any compromise agreement, without bringing an action for rescission. This is because he may regard the compromise as already rescinded by the breach thereof of the other party. (Chavez vs. CA, G.R. No. 159411, March 18, 2005)

Compromise Codal Provisions

CHAPTER 1

COMPROMISES

Art. 2028. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced. (1809a)

Art. 2029. The court shall endeavor to persuade the litigants in a civil case to agree upon some fair compromise. (n)

Art. 2030. Every civil action or proceeding shall be suspended:

(1) If willingness to discuss a possible compromise is expressed by one or both parties; or

(2) If it appears that one of the parties, before the commencement of the action or proceeding, offered to discuss a possible compromise but the other party refused the offer.

The duration and terms of the suspension of the civil action or proceeding and similar matters shall be governed by such provisions of the rules of court as the Supreme Court shall promulgate. Said rules of court shall likewise provide for the appointment and duties of amicable compounders. (n)

Art. 2031. The courts may mitigate the damages to be paid by the losing party who has shown a sincere desire for a compromise. (n)

Art. 2032. The court's approval is necessary in compromises entered into by guardians, parents, absentee's representatives, and administrators or executors of decedent's estates. (1810a)

Art. 2033. Juridical persons may compromise only in the form and with the requisites which may be necessary to alienate their property. (1812a)

Art. 2034. There may be a compromise upon the civil liability arising from an offense; but such compromise shall not extinguish the public action for the imposition of the legal penalty. (1813)

Art. 2035. No compromise upon the following questions shall be valid:

(1) The civil status of persons;

(2) The validity of a marriage or a legal separation;

(3) Any ground for legal separation;

(4) Future support;

(5) The jurisdiction of courts;

(6) Future legitime. (1814a)

Art. 2036. A compromise comprises only those objects which are definitely stated therein, or which by necessary implication from its terms should be deemed to have been included in the same.

A general renunciation of rights is understood to refer only to those that are connected with the dispute which was the subject of the compromise. (1815)

Art. 2037. A compromise has upon the parties the effect and authority of res judicata; but there shall be no execution except in compliance with a judicial compromise. (1816)

Art. 2038. A compromise in which there is mistake, fraud, violence, intimidation, undue influence, or falsity of documents, is subject to the provisions of Article 1330 of this Code.

However, one of parties cannot set up a mistake of fact as against the other if the latter, by virtue of the compromise, has withdrawn from a litigation already commenced. (1817a)

Art. 2039. When the parties compromise generally on all differences which they might have with each other, the discovery of documents referring to one or more but not to all of the questions settled shall not itself be a cause for annulment or rescission of the compromise, unless said documents have been concealed by one of the parties.

But the compromise may be annulled or rescinded if it refers only to one thing to which one of the parties has no right, as shown by the newly-discovered documents. (n)

Art. 2040. If after a litigation has been decided by a final judgment, a compromise should be agreed upon, either or both parties being unaware of the existence of the final judgment, the compromise may be rescinded.

Ignorance of a judgment which may be revoked or set aside is not a valid ground for attacking a compromise. (1819a)

Art. 2041. If one of the parties fails or refuses to abide by the compromise, the other party may either enforce the compromise or regard it as rescinded and insist upon his original demand. (n)

Nominal Damages

What are nominal damages?

Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him. (Art. 2221, Civil Code)

Award of nominal damages in labor cases

Nominal damages "may be awarded to a plaintiff whose right has been violated or invaded by the defendant, for the purpose of vindicating or recognizing that right, and not for indemnifying the plaintiff for any loss suffered by him. Its award is thus not for the purpose of indemnification for a loss but for the recognition and vindication of a right." The amount of nominal damages to be awarded the employee is addressed to the sound discretion of the court, taking into consideration the relevant circumstances.43 Nevertheless, while the amount of damages is left to the discretion of the court, it has been held that –

Again, we stress that though the Court is given the latitude to determine the amount of nominal damages to be awarded to an employee who was validly dismissed but whose due process rights were violated, a distinction should be made between a valid dismissal due to just causes under Article 282 of the Labor Code and those based on authorized causes, under Article 283. The two causes for a valid dismissal were differentiated in the case of Jaka Food Processing Corporation v. Pacot where the Court held that:

A dismissal for just cause under Article 282 implies that the employee concerned has committed, or is guilty of, some violation against the employer, i.e. the employee has committed some serious misconduct, is guilty of some fraud against the employer, or, as in Agabon, he has neglected his duties. Thus, it can be said that the employee himself initiated the dismissal process.

On another breath, a dismissal for an authorized cause under Article 283 does not necessarily imply delinquency or culpability on the part of the employee. Instead, the dismissal process is initiated by the employer’s exercise of his management prerogative, i.e. when the employer opts to install labor saving devices, when he decides to cease business operations or when, as in this case, he undertakes to implement a retrenchment program.

x x x x

Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause under Article 282 but the employer failed to comply with the notice requirement, the sanction to be imposed upon him should be tempered because the dismissal process was, in effect, initiated by an act imputable to the employee; and (2) if the dismissal is based on an authorized cause under Article 283 but the employer failed to comply with the notice requirement, the sanction should be stiffer because the dismissal process was initiated by the employer’s exercise of his management prerogative.

Since in the case of JAKA, the employee was terminated for authorized causes as the employer was suffering from serious business losses, the Court fixed the indemnity at a higher amount of P50,000.00. In the case at bar, the cause for termination was abandonment, thus it is due to the employee’s fault. It is equitable under these circumstances to order the petitioner company to pay nominal damages in the amount of P30,000.00, similar to the case of Agabon. (LIBCAP Marketing Corp vs. Baquial, G.R. No. 192011, June 30, 2014)

Award of actual, moral, temperate or moderate damages preclude nominal damages

It should be noted that nominal damages cannot co‐exist with actual or compensatory damages because nominal damages are recoverable when the damages suffered cannot be proved with reasonable certainty. The law presumes damage although actual or compensatory damages are not proven. Award of actual, moral, temperate or moderate damages preclude nominal damages. But it may be awarded together with attorney’s fees. (Pineda, pp. 284‐285, 2009 ed)

Nominal damages based on breach of contract

■ No moral or exemplary damages was awarded. Nevertheless, when confronted with their failure to deliver on the wedding day the wedding cake ordered and paid for, petitioners gave the lame excuse that delivery was probably delayed because of the traffic, when in truth, no cake could be delivered because the order slip got lost. For such prevarication, petitioners must be held liable for nominal damages for insensitivity, inadvertence or inattention to their customer's anxiety and need of the hour. (Francisco v. Ferrer)

■ Respondent admitted that three hotel functions coincided with petitioners’ reception. To the Court, the delay in service might have been avoided or minimized if respondent exercised prescience in scheduling events. No less than quality service should be delivered especially in events which possibility of repetition is close to nil. Petitioners are not expected to get married twice in their lifetimes.

In the present petition, under considerations of equity, the Court deems it just to award the amount of P50,000.00 by way of nominal damages to petitioners, for the discomfiture that they were subjected to during to the event. The Court recognizes that every person is entitled to respect of his dignity, personality, privacy and peace of mind. Respondent’s lack of prudence is an affront to this right. (Sps. Guanio vs Makati Shangri-la Hotel and Resort, G.R. No. 190601, February 7, 2011)

Temperate or Moderate Damages

What are temperate of moderate damages?

Temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be provided with certainty. (Art. 2224, Civil Code)

Temperate damages in lieu of actual damages 

Despite the failure to submit proof of actual damages, “a party still has the option of claiming temperate damages, which may be allowed in cases where, from the nature of the case, definite proof of pecuniary loss cannot be adduced although the court is convinced that the aggrieved party suffered some pecuniary loss.” In this case, the petitioners submitted photographs as evidence to show “the extent of damage done to the house, the tailoring shop and the petitioners’ appliances and equipment.” The loss thereof or damage to petitioner is directly attributed to the truck ramming her house and tailoring shop, as well as the gross negligence of the driver in handling the truck. However, the photographs alone is not sufficient to establish the amount with certainty. The Supreme Court found the award of P200,000.00 as a fair and sufficient award by way of temperate damages based on “the attendant circumstances and given the property destroyed.” (Tan v. OMC Carriers, Inc., G.R. No. 190521, January 12, 2011)

Temperate damages in lieu of loss of earning capacity 

For loss of earning capacity, temperate damages may be awarded in lieu of actual damages “where earning capacity is plainly established but no evidence was presented to support the allegation of the injured party’s actual income.” Here, the deceased income-earning capacity was never disputed. His five minor children “all relied mainly on the income earned by their father from his tailoring activities for their sustenance and support. Under these facts and taking into account the unrebutted annual earnings of the deceased, [the Court holds] that the petitioners are entitled to temperate damages in the amount of P300,000.00 [or roughly, the gross income for two (2) years] to compensate for damages for loss of the earning capacity of the deceased.” (Tan v. OMC Carriers, Inc.,)

Amount of temperate damages left to the discretion of the courts but should be reasonable

In the absence of competent proof on the amount of actual damages suffered, a party is entitled to temperate damages. Temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty. The amount thereof is usually left to the discretion of the courts but the same should be reasonable, bearing in mind that temperate damages should be more than nominal but less than compensatory. (Meralco vs Castillo, G.R. No. 182976. January 14, 2013)

Even if the pecuniary loss is capable of proof, an award of temperate damages is not precluded

Even if the pecuniary loss suffered by the claimant is capable of proof, an award of temperate damages is not precluded. The grant of temperate damages is drawn from equity to provide relief to those definitely injured. Therefore, it may be allowed so long as the court is convinced that the aggrieved party suffered some pecuniary loss.” (Gonzales vs. CASURECO, et al., G.R. No. 181096, March 6, 2013)

Temperate damages cannot be granted concurrently with nominal damages

Temperate damages are incompatible with nominal damages hence, cannot be granted concurrently. (Citibank vs IAC)

Liquidated Damages

What are liquidated damages?

Liquidated damages are those agreed upon by the parties to a contract, to be paid in case of breach thereof. (Art. 2226, Civil Code)

When shall liquidated damages be reduced?

Liquidated damages, whether intended as an indemnity or a penalty, shall be equitably reduced if they are iniquitous or unconscionable. (Art. 2227, Civil Code)

How shall liquidated damages be determined if the breach of contract committed was not the one contemplated by the parties?

When the breach of the contract committed by the defendant is not the one contemplated by the parties in agreeing upon the liquidated damages, the law shall determine the measure of damages, and not the stipulation. (Art. 2228, Civil Code)