INTERNATIONAL EXCHANGE BANK NOW UNION BANK OF PHILIPPINES v. SPS. JEROME

FACTS:

Spouses Jerome and Quinnie Briones (Spouses Briones) borrowed a loan of P3,789,216 from International Exchange Bank (iBank) to purchase a BMW Z4 Roadster. The loan stipulated that the Spouses Briones were required to take out an insurance policy on the vehicle, with the insurance proceeds payable to iBank. iBank was also given the authority to file an insurance claim in case of loss or damage to the vehicle. On November 5, 2003, the vehicle was carnapped. The Spouses Briones reported the incident to the police and informed iBank. iBank instructed the Spouses Briones to continue paying the monthly installments, which they complied with. However, iBank later demanded full payment of the lost vehicle. The Spouses Briones filed a claim with their insurance company, but it was denied due to delayed reporting. iBank filed a complaint against the Spouses Briones for defaulting on the loan. The Regional Trial Court dismissed iBank's complaint, ruling that iBank, as the Spouses Briones' attorney-in-fact, had the obligation to facilitate the filing of the insurance claim. The Court of Appeals affirmed the decision, holding iBank liable for damages suffered by the Spouses Briones. iBank filed a petition for review with the Supreme Court, arguing that it is entitled to recover the vehicle or collect a sum of money from the Spouses Briones. The issues raised before the Supreme Court are whether an agency relationship existed between the parties, whether the agency relationship was revoked or terminated, and whether iBank is entitled to the return of the vehicle or payment of the outstanding loan balance.

ISSUES:

  1. Whether an agency relationship existed between the parties.

  2. Whether the agency relationship was revoked or terminated.

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

RULING:

  1. Yes, an agency relationship existed between the parties. As stated in the promissory note with chattel mortgage, the Spouses Briones appointed iBank as their attorney-in-fact with full power to process the insurance claim and collect the insurance proceeds in case of loss or damage to the vehicle. The acceptance of this agency bound iBank to carry out its duties.

  2. The agency relationship was not revoked or terminated by respondent Jerome's direct dealing with the insurance company. Respondents' duty to file the insurance claim with the insurance company was not excused by Jerome's actions. iBank still had the obligation to facilitate the filing of the claim and pursue the release of the insurance proceeds.

  3. Petitioner is not entitled to the return of the mortgaged vehicle or payment of the outstanding balance of the loan. iBank failed to fulfill its duties as the attorney-in-fact of the Spouses Briones. Instead of filing an insurance claim, iBank demanded full payment from the Spouses Briones. iBank prioritized its interests over that of its principal, which made it liable for the damages suffered by the Spouses Briones.

PRINCIPLES:

  • Upon accepting an agency, the agent becomes bound to carry out the agency and shall be held liable for the damages, which the principal may incur due to the agent's non-performance.

  • The duties and obligations of an agent to its principal should be observed diligently and in good faith. The agent must prioritize the interests of the principal over its own interests.